Bundesbank says euro zone to grow slower than thought

FRANKFURT, Aug 18 (Reuters) : The euro zone economy is expected grow more slowly than initially expected during the rest of this year as conflicts in Ukraine and elsewhere weigh on business confidence, Germany's central bank said on Monday.
The euro zone economy unexpectedly stalled in the second quarter, dragged down by shrinking growth in Germany and a stagnant France, leading to renewed calls for the European Central Bank to provide more stimulus, such as large-scale asset purchases.
The ECB cut interest rates to record lows and launched a fresh round of ultra-cheap loans in June, which the Bundesbank said was "justifiable, on the whole".
But the German central bank also warned about overheating financial or property markets, and the risk of minimising governments' incentives to reform their economies.
"Following second-quarter stagnation, the euro area is looking at a resumption of positive economic growth, albeit not at the pace predicted by many analysts in the spring," the Bundesbank said in its monthly report for August.
"The geopolitical tensions in Eastern Europe owing to the Ukraine conflict as well as in other parts of the world are now appearing to weigh more heavily on corporate sentiment."
European sanctions against Russia and the country's response had in particular dampened sentiment, the Bundesbank said, though noting that the trade restrictions would only affect a fraction of EU exports directly.