Friday

24th Feb 2017

German economic slowdown poses risk for EU recovery

  • Fears of a German economic slowdown prompted by Russian sanctions have spooked investors. (Photo: Songkran)

Fears that the eurozone’s recovery could stall have heightened after new German data indicated the bloc’s economic powerhouse is performing at its weakest level since 2012.

Published on Tuesday (12 August) the ZEW think-tank’s index of financial market confidence, a trusted indicator of German economic sentiment, hit its lowest level since December 2012, falling to 8.6 points in August - an 18.5 point fall from July.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The decline is the sharpest since July 2012, when the eurozone slipped back into a double dip recession.

The euro also fell to a near nine-month low against the dollar on the news.

In a statement accompanying the data, ZEW warned that it suggested “markedly reduced investment activities on the part of German firms against the backdrop of uncertain sales prospects.”

“Since the economy in the eurozone is not gaining momentum either, the signs are that economic growth in Germany will be weaker in 2014 than expected”, it said.

It added that its Indicator of Economic Sentiment for the Eurozone also saw a sharp decline in August. The indicator has lost 24.4 points since July, now standing at 23.7 points.

The decline was “likely connected to the ongoing geopolitical tensions that have affected the German economy,” ZEW noted.

Europe and the US have imposed tough economic sanctions on Russia because of its role in Ukraine but, together with Moscow’s retaliatory sanctions, European economies could suffer collateral damage.

As the currency bloc’s largest economy and manufacturer, the eurozone is reliant on Germany driving its economic recovery.

The French economy is also stagnant, while figures from Rome last week suggest that Italy has slipped back into recession.

“Fear is back,” said Carsten Brzeski, economist with the Benelux-based bank ING.

“Today’s ZEW sends a worrying signal that the growth performance in the second quarter could suddenly morph from a one-off into an undesired trend.”

The German treasury is due to publish official figures on Thursday on growth in the second quarter of this year.

Economists predict that the economy flatlined between April and June, after expanding by 0.8 percent in the first three months of 2014.

The EU statistical agency Eurostat will the same day also publish its first formal estimate of second quarter economic performance across the bloc.

In May, before the latest round of the EU-Russia sanctions battle, the European Commission forecast that the 18-country currency union would grow by 1.2 percent this year and by 1.7 percent in 2015.

European industrial output slumps

The eurozone economy is facing another slowdown after figures revealed that industrial output fell for a second successive month.

Opinion

The crisis we face in the Lake Chad Basin

With no end in sight to this crisis, humanitarian actors must call for concerted engagement of political, developmental and security actors to help stabilise the region, writes the head of the UN migration agency.

Le Pen wants to 'do away' with the EU

The far-right presidential candidate said that she would create a "Europe of free nations", while taking France out of Nato command and "tie up" Russia to Europe.

News in Brief

  1. Spanish court jails former IMF chief Rato
  2. Macron proposes Nordic-style economic model for France
  3. Germany posts record high budget surplus
  4. Labour ousts Ukip in Brexit homeland
  5. Dutch lower house approves EU-Ukraine treaty
  6. WTO says Russian pork ban was illegal
  7. Belgian nuclear plant made 'significant progress' on safety
  8. Report: Commission gauging EU support for Poland sanctions

Stakeholders' Highlights

  1. EURORDISJoin the Rare Disease Day and Help to Advocate for More Research on Rare Diseases
  2. European Healthy Lifestyle AllianceStudents Who Are Considered Fit Get Better Grades in School
  3. QS World MBA TourMeet with Leading International Business Schools in Paris on March 4th
  4. Malta EU 2017Economic Governance: Agreement Reached on Structural Reform Support Programme for Member States
  5. Socialists & DemocratsWomen Have to Work Ten Years Longer to Match Lifetime Earnings of Men
  6. Counter BalanceTrans-Adriatic Pipeline Is a Major Risk for Banks, Warns New Analysis
  7. Martens CentreEU and US Migration Policies Compared: Join the Debate on February 28th
  8. Swedish EnterprisesTechnology and Data Flows - Shaping the Society of Tomorrow
  9. UNICEFNearly 1.4 Million Children at Risk of Death as Famine Looms Across Africa and Yemen
  10. Malta EU 2017End of Roaming Fees: Council Reaches Agreement on Wholesale Caps
  11. Nordic Council of MinistersNordic Innovation House Opens in New York to Help Startups Access US Market
  12. Centre Maurits CoppietersMinorities and Migrations