Saturday

11th Jul 2020

German economy sparks hopes of EU recovery

  • Germany is traditionally seen as the EU's economic motor (Photo: Duchamp)

Fresh data on business sentiment in Germany have sparked hopes that Europe's biggest economy may be on the path to recovery, while the latest figures from the UK have disappointed market insiders.

The closely watched business climate index by the Munich-based Institute for Economic Research (Ifo) rose to 87.3 points in July on Friday (24 July), improving for the fourth consecutive time after reaching a seven-month high in June.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Firms are not so unhappy with the current business situation as they were the previous month. Those surveyed are, again, less skeptical about the coming six months. It looks as though the economy is gaining traction," the institute said in press release.

The index - based on a survey of 7,000 German executives - comes following statistics earlier this month which suggested that industry output in the biggest economy of the 27-member EU grew at its fastest rate in 16 years in May.

"Germany has all of a sudden become the leader of the pack, showing stronger signs of stabilisation than most other euro zone countries," economist Carsten Brzeski at ING Financial Markets commented for Forbes.

The German economy shrank by 3.8 percent in the first quarter of this year, its worst quarterly performance since reunification in 1990.

Several smaller EU member states, mainly in the Central and Eastern Europe, suffered due to lower business orders from the bloc's economic motor. Any signals from Berlin are therefore closely watched in several other EU capitals.

Even Brussels rushed to comment on the positive results from Germany. "The worst might be behind us," a spokeswoman of the European Commission, Katharina von Schnurbein, told a news conference on Friday.

According to a fresh Eurobarometer survey, a third of EU citizens feared they might lose their job due to the economic slump, mainly in Spain. People in the three Baltic states, Latvia, Lithuania and Estonia are the most concerned about the future developments of their countries' economies.

UK still in the depressed mode

Unlike Germany, Britain is still mired in bad news – the country's GDP dropped by 0.8 percent between this April and June and by 5.6 percent compared to the same period last year, according to an estimate by the UK's Office for National Statistics.

It was the largest annual decline since records began in 1955 and larger than expected by analysts. Economists surveyed by Dow Jones Newswires had estimated a 0.3 percent quarterly decline and a 5.2 percent annual drop. On the positive side, the contraction was lower than the 2.4 percent seen in the first quarter.

"This is a massive setback for hopes that the UK economy could see growth again by the end of the year," said Jane Foley, research director at Forex.com, told Market Watch website.

The decline in Britain's output has been primarily driven by the financial services, the sector worst hit by the global credit crunch.

Michel lays out compromise budget plan for summit

Ahead of expected tense discussions next weekend among EU leaders, European Council president Charles Michel tries to find common ground: the recovery package's size, and grants, would stay - but controls would be tougher.

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

EU plans tougher checks on foreign takeovers

The EU and its member countries are worried that foreign powers, such as China and its state-owned companies will take advantage of the economic downturn and buy up European firms

Vestager hits back at Lufthansa bailout criticism

Commission vice-president in charge of competition Margarethe Vestager argued that companies getting large capital injections from the state during the corona crisis still have to offset their competitive advantage.

News in Brief

  1. Citizens' perception of judicial independence drops
  2. Irish finance minister voted in as eurogroup president
  3. Italy's League party opens office near old communist HQ
  4. 'Significant divergences' remain in Brexit talks
  5. Germany identifies 32,000 right-wing extremists
  6. WHO to hold probe of global Covid-19 response
  7. China accuses Australia of 'gross interference' on Hong Kong
  8. EU to let Croatia, Bulgaria take first step to join euro

EU forecasts deeper recession, amid recovery funds row

The economies of France, Italy and Spain will contract more then 10-percent this year, according to the latest forecast by the EU executive, as it urges member state governments to strike a deal on the budget and recovery package.

Stakeholders' Highlights

  1. UNESDANext generation Europe should be green and circular
  2. Nordic Council of MinistersNEW REPORT: Eight in ten people are concerned about climate change
  3. UNESDAHow reducing sugar and calories in soft drinks makes the healthier choice the easy choice
  4. Nordic Council of MinistersGreen energy to power Nordic start after Covid-19
  5. European Sustainable Energy WeekThis year’s EU Sustainable Energy Week (EUSEW) will be held digitally!
  6. Nordic Council of MinistersNordic states are fighting to protect gender equality during corona crisis

Latest News

  1. Michel lays out compromise budget plan for summit
  2. Border pre-screening centres part of new EU migration pact
  3. EU 'failed to protect bees and pollinators', report finds
  4. MEPs give green light to road transport sector reform
  5. If EU wants rule of law in China, it must help 'dissident' lawyers
  6. Five ideas to reshape 'Conference on Future of Europe'
  7. EU boosts pledges to relocate minors from Greece
  8. Hydrogen strategy criticised for relying on fossil fuel gas

Join EUobserver

Support quality EU news

Join us