Germany heading for recession, warn experts

Berlin, September 25, 2012

Germany is heading for recession, economists warned as the euro zone crisis pushed down the business confidence in Europe’s largest economy for a fifth straight month in September.

The business sentiment fell as companies struggled with a bleaker economic outlook and the European Central Bank's (ECB) bond buying plan failed to create much boardroom cheer.

Germany's relative resilience to the euro zone debt crisis has been steadily fraying as its firms see falling demand for their products from European partners and signs of a slowdown in other markets.

The ECB's plan for potentially unlimited government bond-buying has raised hopes on financial markets of an end to the most acute phase of the crisis, but that optimism has not spread to the real economy.

The Munich-based Ifo institute's monthly sentiment index reached its lowest since early 2010 and the outlook component hit its worst level since May 2009.

"Today's Ifo index shows that German companies remain sceptical about the economic impact of (ECB president) Mario Draghi's magic," ING Bank economist Carsten Brzeski said.

"Despite fears of a looming euro zone break-up clearly fading away, German businesses are downscaling their expectations. The German economy could see a contraction in the third quarter."

In its monthly report, the Bundesbank said the domestic economy was robust, but added it saw signs of "weaker dynamics" and "great uncertainty".-Reuters

Tags: Germany | Recession |