9 June 2010 Last updated at 02:34 ET

EU financial woes 'to knock world economy'

Mr Stevens is cautious about Europe, but says Australia is shielded

Europe's continuing financial woes are likely to hit the global economy, the head of the Australian central bank has warned.

However, Reserve Bank of Australia head Glenn Stevens said his country would be relatively unaffected because of its strong trade links with East Asia.

He said this would shield Australia from Europe, despite saying the rate of growth in Asian nations would slow.

Australia was the only major developed nation to avoid entering recession.

It was greatly helped by its trade ties with China, especially its exports of iron ore and other raw materials.

"The [European] episode is not yet over, and the issues will continue to need careful handling by all concerned and close monitoring by the rest of us," said Mr Stevens.

"It cannot be denied that the potential for further financial turmoil exists."