The European Central Bank, which cut 25 basis points of interest rates yesterday, has warned that growth forecasts for the eurozone look worse than they did just two months ago.

Wim Duisenberg warned that growth was expected to slow to just two per cent this year as a result of low external demand. His comments were read as fresh evidence that Europe could be heading into recession.

The move came as the IMF warned Gordon Brown that Britain was unlikely to meet its growth target of 2.25 to 2.75 per cent.