The German economy probably contracted in the last three months of 2002, according to the Bundesbank. "Real GDP in the fourth quarter of 2002. may have been slightly lower than in the previous three month period," the central bank said in its February report. It added that Europe's largest economy was "treading water" in the final months of last year and has been in a phase of "quasi-stagnation" for two years. On a year-on-year basis, the bank said GDP expanded by 0.5pc in the fourth quarter. The German economy grew by just 0.2pc last year, according to the Federal Statistics Office, while the European Commission has warned that the eurozone could contract in the first quarter of 2003. ECB president Wim Duisenberg may hint at possible rate cuts when he speaks in Brussels today, according to analysts. Last week, Irish central bank president, John Hurley, said that eurozone inflation could fall by more than expected giving the ECB "some room for manoeuvre" on rates. The Bundesbank said that global economic weakness had affected Germany, but also blamed domestic factors such as "rigidities in the labour market, higher taxes and public charges". //www.fxcentre.com