German Finance Minister Peer Steinbrueck called for calm here on Tuesday after the U.S. banking turmoil.
However, Steinbrueck acknowledged the world financial markets were facing "very difficult and serious situation."
In the meantime, German stocks slumped for the second day in a row in Frankfurt on Tuesday as the DAX, or the index of the leading 30 shares, fell around 1.6 percent at the opening, breaking the benchmark of 6,000 points.
Speaking ahead of the start of the 2009 budget debates in the German lower house of parliament, Steinbrueck said although the financial crisis was the worst in decades, there would be no "domino effects" in Europe and no widespread bank failures.
He insisted that the effects of the financial crisis on the German real economy would be "limited."
The minister pointed out that the U.S. Federal Reserve, the European Central Bank and other central banks were working to ensure adequate liquidity in the money market.