By Jonathan Davies

The President of the European Central Bank (ECB), Mario Draghi, has said he is ready to increase economic stimulus in the eurozone to fend off the effect of China's slowdown.

The ECB is already pumping in €60 billion each month into the eurozone economy. But as the effects of China's problems gradually grow across Europe, Mr Draghi said he is prepared to inject even more.

He said he will have a clearer picture of the outlook for China's economy following this weekend's meeting of G20 finance ministers and central bankers.

“We are observing a weakening of the prospects of the Chinese economy,” he said.

“This has two effects substantially. One is through the trade channel, weakening the economies of the rest of the world … and the confidence effect on the stock market and all the other financial markets, which is also operating on the negative side.”

Mr Draghi's comments immediately resulted in the euro falling sharply and European stocks rising.

Earlier this week, the International Monetary Fund (IMF) suggested that central banks continue to keep interest rates low and maintain economic stimulus, known as quantitative easing. The IMF also called on central banks to increase QE if the global economic situation deteriorated.