Wednesday

1st Jun 2016

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.

Investigation

EU never used power to scrutinise emissions labs

The commission has had the power to compel states to send assessments of the companies that test car emissions since 2007, but it has never made a single request.

MEPs fast-track EU border guard plan

EU parliament gives thumbs up to controversial plan for new border guard force that can be deployed to EU states even if they do not want it. Force could be operational by autumn.

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceSugar-Sweetened Beverage Sales Barometer Unveils Unhealthy Drinking Patterns in Europe
  2. EJCWelcomes EU Commission Code of Conduct on Countering Illegal Hate Speech Online
  3. Access NowEDRi & Access Now Withdraw From the EU Commission IT Forum Discussions
  4. EJCCalls on EU Parliament to Take Action Against MEP who Compared Israelis to "a rash"
  5. EU Sustainable Energy WeekHave Your Say On Europe's Energy Future At Our High-Level Policy Conference.
  6. CESIUpcoming On June 14: CESI@Noon On ‘Labour Market Integration Of Regugees’
  7. ACCAEducation and Training 2020 - Giving Young People the Workplace Skills They Need
  8. EPSUTrade Unions Back New Undeclared Work Platform
  9. European Healthy Lifestyle AllianceCould targeting children’s fitness boost academic performance?
  10. World VisionDeclares the World Humanitarian Summit a Positive Step in a Longer Journey to Ending Need
  11. EJCPresident Dr. Moshe Kantor on Brexit and the Jewish Question
  12. Swedish EnterprisesNew Rules For Posted Workers - Better Protection or the End of Posting ?

Latest News

  1. Anti-fraud chief: EU was 'wrong' to lift my immunity
  2. MEPs fast-track EU border guard plan
  3. EU never used power to scrutinise emissions labs
  4. EU firms free to ban Muslim headscarves, jurist says
  5. Stop dreaming of integrated EU utopia, says Tusk
  6. Poland questions legality of EU probe
  7. German NGOs want judges to probe EU-Canada trade deal
  8. EU watchdog calls for fines on shady lobbyists