Business confidence in Germany, which has led the EU economic revival over the last year, declined for a fourth month in August, which further clouded prospects of a broader recovery across the EU.
Germany’s Ifo Business Climate Index in manufacturing, which
looks at the confidence of the country’s 7,000 firms, fell to
106.3 in August from 108 in July.
It’s the lowest figure since last July, marking the longest
successive monthly decline since 2012, the report said.
Monday’s figures come after frustrating economic data for the
second quarter. It showed Europe’s biggest economy contracted 0.2
percent during the period, after it grew 0.7 percent in the first
quarter. Much of the unexpected drop is attributed to the effects of the crisis in
Ukraine that has led to a tough ‘sanctions war.’ Even after the
disappointing second quarter, Germany believes it will achieve
1.8 percent growth this year. By contrast, the UK, which is not
part of the euro currency zone, showed its strongest quarterly
economic growth in 6 years, with 0.8 percent in the second quarter.
In July German businesses began to send clear signs they are
suffering from the political standoff with
Russia – one of its key economic partners.
German Chancellor Angela Merkel has confirmed that the growth of
the country’s economy has been hit by the crisis in Ukraine.
“There are, however, some uncertainties – I don’t want to
conceal that – the whole Ukraine-Russia situation shows that we
of course have a big interest in our international relations
being constructive again,” Merkel is cited by Reuters.
But the Chancellors stressed that she still thought the overall
annual growth rate of the economy would be “good, if nothing
dramatic happens.”
German sports retailer Adidas said it would speed up efforts to
close stores in the Russian and CIS markets in 2014 and 2015.
Carmaker Volkswagen, that’s also Europe’s biggest manufacturer,
said it sold eight percent fewer vehicles in Russia in the first
two quarters compared to last year.
Russia is Europe’s third-largest trading partner, in 2013 trade
between Germany and Russia was €76.5 billion.
Germany’s exports to Russia may go down by 25 per cent this year,
the union of leading associations representing German businesses
said in a statement.
“It is possible that by the end of the year our exports to
Russia will decline by 20-25 per cent. It will affect some 50,000
workplaces in Germany,” Eckhard Cordes, the chairman of
Germany’s Committee on Eastern European Economic Relations,
stressed.
The main reason for the Eurozone’s poor GDP growth are the
sanction imposed by the EU against Russia, Michael Mross, chief
editor of MMNews.de website, told RT.
“When you take, for example, the big German companies –
almost every big German company has close business ties with
Russia… Everybody is suffering more or less. In the end of the
day, this has not only psychological effect, but a business
effect,” he said.
Russia is a large market for not only Germany, but for all
European markets, which is why it is important to keep relations
functional.
“We have a enough problems here in the Eurozone. And this is
something we don’t need. And if you speak to business leaders
behind closed doors – they’re all against these sanctions,”
Mross added.
‘Stunningly destructive’ austerity policies
Many have voiced concerns over Germany’s push towards economic
austerity, a Spartan-spending effort to re-balance the eurozone.
In the spring, many of the so-called ‘Euro-skeptics’ won in the European parliamentary elections.
On Monday, the French government resigned just four months after it was formed
after the May elections.They quit after ministers attacked
President Francois Hollande’s plans for taxation and cuts, and
over a major disagreement with Germany’s austerity program.
France, which as long stood with Germany politically, decided to put an end to unpopular austerity
policies back in May.
Not only politicians doubt the direction over the 18-nation
currency union. Europe is still shaking off its seven year
recession, which has brought economic growth to a standstill and
unemployment to record levels. Recovery has been described by Nobel Prize winning economists
as both “stunningly destructive” and a “dismal
failure.”
Article source: http://rt.com/business/182672-german-business-confidence-low-august/
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