Sunday

20th Aug 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.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

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.

Brexit realities dawn in UK

Just over a year after a small majority voted for Britain to leave the EU, new realities are dawning on both the in and the out camps.

News in Brief

  1. Macedonia sacks top prosecutor over wiretap scandal
  2. ECB concerned stronger euro could derail economic recovery
  3. Mixed Irish reactions to post-Brexit border proposal
  4. European Union returns to 2 percent growth
  5. Russian power most feared in Europe
  6. Ireland continues to refuse €13 billion in back taxes from Apple
  7. UK unemployment lowest since 1975
  8. Europe facing 'explosive cocktail' in its backyard, report warns

Stakeholders' Highlights

  1. European Healthy Lifestyle AllianceDoes Genetics Explain Why So Few of Us Have an Ideal Cardiovascular Health?
  2. EU2017EEFuture-Themed Digital Painting Competition Welcomes Artists - Deadline 31 Aug
  3. ACCABusinesses Must Grip Ethics and Trust in the Digital Age
  4. European Jewish CongressEJC Welcomes European Court of Justice's Decision to Keep Hamas on Terror List
  5. UNICEFReport: Children on the Move From Africa Do Not First Aim to Go to Europe
  6. Centre Maurits CoppietersWe Need Democratic and Transparent Free Trade Agreements Says MEP Jordi Solé
  7. Counter BalanceOut for Summer, Ep. 2: EIB Promoting Development in Egypt - At What Cost?
  8. EU2017EELocal Leaders Push for Local and Regional Targets to Address Climate Change
  9. European Healthy Lifestyle AllianceMore Women Than Men Have Died From Heart Disease in Past 30 Years
  10. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  11. ACCAAnnounces Belt & Road Research at Shanghai Conference
  12. ECPAFood Waste in the Field Can Double Without Crop Protection. #WithOrWithout #Pesticides