Chinese leader casts doubt on Europe's economic recovery

The Communist nation's premier, Wen Jiabao, issued his warnings a day after France admitted it will struggle to keep its top credit rating and days after a downgrade of Spain's credit status had caused jitters in financial markets.

Addressing business leaders during an official visit to Japan, he raised the prospect of a second dip in global economic growth rates.

"The world economy is stable and beginning to revive, but this revival is slow and there are many uncertainties and destabilising factors."

It is too early to wind down stimulus deployed during the 2007-2009 financial crisis, he added.

Governments around the world ran up record debts during the $5 trillion (3.45 trillion) effort to pull the economy out of its deepest slump since the Depression and now face having to cut debt without choking off growth.

"Some countries have experienced sovereign debt crises, for example Greece. Is this kind of phenomenon over? Now it seems that it's not so simple," the Chinese Prime Minister added.

"The sovereign debt crisis in some European countries may drag down Europe's economic recovery."

Ewald Nowotny, a member of the governing council of the European Central bank. said: "The big challenge is to prevent a vicious circle in which a crisis of the public sector again leads to crisis developments in the financial and real sectors of the economy," he told a conference hosted by Austria's central bank.

Greece stumbled into the global spotlight late last year when it sharply revised its budget deficit figures, provoking a series of credit downgrades and sending its borrowing costs soaring, which fanned fears it may default on its obligations.

While a e110bn rescue package put together by the European Union and the International Monetary Fund helped to avert an immediate meltdown, it failed to dispel fears that other highly indebted Eurozone members such as Spain, Portugal and Italy, may face a similar fate.

Major improvements are needed in the euro area to prevent bad fiscal behaviour and to enforce effective sanctions in the case of breaches of fiscal rules, Jean-Claude Trichet, the head of the ECB, told the conference.

However, Mr Wen said the world's third-largest economy remained on course to meet its growth targets this year.