NEWS | Wednesday, 27 August 2008

Recession rearing its head in Germany

New data released in Germany yesterday gave further indications of a looming recession, albeit mild, that may be hitting the country known to be the richest contributor to the EU’s coffers.
The outlook for German business plunged to its lowest level since 1993, when shortly after reunification, the country had undergone a deep recession.
The Ifo institute in Munich also showed the lowest reading in business confidence over the last three years.
The German research organisation Gfk revealed how household confidence had also gone down.
After showing a decline over the recent years, the country’s unusually high savings rate is now rising again. Known for its solid job market, unemployment figures in Germany have not increased, but the reluctance of consumers to spend has presented an economic problem of serious concern. In fact the German Economy Minister Michael Glos referred to the country’s spending as the “Achilles’ heel”.
While not discounting the possibility of an imminent technical recession, analysts said that a full-blown recession is unlikely to happen, and that Germans could be fairly confident that growth would resume next year if manufacturers are careful on investment.
Meanwhile, the European Central Bank has not signalled any intention to allow governments to lower bank interest rates in order to create incentives for growth.