FRANKFURT (Reuters) - A day after Mario Draghi presented a sobering economic outlook for the euro zone, the nervousness coursing through his European Central Bank was underscored by a fellow policy maker.
"There is serious uncertainty at the moment because you don't know exactly whether this is a pothole on the road or a landslide," said Ewald Nowotny, the head of Austria's central bank and member of the ECB's policy-setting Governing Council, of which Draghi is president.
Nowotny was referring to the new threats to the world and euro zone economies from China's slowdown and market turmoil. As a result, there is increased pressure on the ECB to bolster its money-printing quantitative easing more than planned.
Benchmarks used to measure the euro zone economy, whether on lending or economic output are modest, despite a 60 billion euro a month ECB scheme to buy chiefly government bonds.
As oil prices tumble, price inflation, one of the key ways of taking the economy's pulse, has fallen to 0.2 percent. Draghi has warned that it could yet dip into the red -- a danger zone for the ECB whose goal it is to keep it nudging 2 percent.
To make matters worse, China is in trouble.
Draghi said on Thursday that he was seeking to find out more about China's problems at a meeting of the Group of 20 leading global economies, whose finance ministers and central bankers gather in the Turkish capital of Ankara on Friday and Saturday.
"We have to see whether these effects are transitory or permanent," Draghi told reporters. "Then we will decide whether to do more."
'More' would be to increase asset buying. The ECB has already made some changes, adjusting the limits on the amount of a bond issue it can buy.
That has been taken by some investors to mean enhanced QE is on the way – possibly, they hope, by raising the current 60 billion euro a month spend to, say, 80 billion euros.
A senior delegate at the G20 told Reuters that the group is likely to send a "reassuring" message on China and will not single out Beijing for criticism over its recent market turmoil.
But brushing off China's difficulties will not be that easy. The gloomy economic-forecast downgrades at the ECB on Thursday were made before the Chinese market meltdown.
"It is not a cyclical problem," said Chang Chun Hua, an economist with Nomura in Hong Kong, pointing to a steep fall in property investment due to a glut of newly built homes as the key reason for the fall.
"It will not rebound. It's a trend. (Chinese) growth will continue to slow."
Nonetheless, Draghi may gloss over China's problems for now, not least because of the limits he faces in responding.
Germany, the economic anchor of the euro zone, and its ultra conservative Bundesbank will be hostile to any extension of money printing beyond its planned end date of September 2016 - another possibility raised by Draghi this week.
Jens Weidmann, the head of the Bundesbank, played down the latest market turbulence in China on Friday.
"I don't see a lasting danger for the global economy," he said, cautioning, as often before, of the 'limits of what a very expansive monetary policy can achieve'.
This is a widely held view in Germany and one that will make it hard for Draghi to keep the money printing presses humming longer than planned.
"It would be wrong to react too quickly," said Volker Wieland, one of the influential group that advises the German government on economic policy. "We can't be paralyzed by these long-range (inflation) targets like a rabbit in the headlights."
Additional reporting by Shadia Nasralla in Vienna; Editing by Jeremy Gaunt