German business morale falls for fourth straight month

Fri Oct 21, 2011 6:03am EDT
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By Sarah Marsh

BERLIN (Reuters) - German business sentiment slid for the fourth month in a row in October, dipping to its lowest level since mid-2010 and compounding fears the euro zone debt crisis could push Europe back into recession if a solution is not found soon.

The Munich-based Ifo economic think tank said on Friday that its closely-watched business climate index, based on a monthly survey of some 7,000 companies, fell to 106.4 in October from a revised 107.4 in September.

This was the lowest level since June 2010, albeit slightly better than the 106.3 forecast in a Reuters poll of 52 economists.

Market sentiment has been rocked this month by uncertainty about a bailout for Greece and fears the euro zone will fail to resolve its debt crisis, which could in turn spiral back into a banking crisis.

"Germany is heading for a home-made recession," said Berenberg Bank's Holger Schmieding. "Ever since Germany pressed for a restructuring of Greek debt in July without putting up a firewall to protect Italy against contagion, Ifo ... has tumbled amid severe financial turmoil."

Criticism of Germany has grown as its deep disagreements with France have indicated the euro zone will make scant progress on strengthening its bailout fund at a summit on Sunday.

German daily Financial Times Deutschland wrote on Friday the situation was turning into a farce and devoted its front page to a plea to leaders to get their acts together and "throw all their weight" at saving the common currency bloc.

France and Germany said in a joint statement on Thursday that European leaders would discuss a global solution to the crisis on Sunday but no decisions would be adopted before a second meeting to be held by Wednesday at the latest.   Continued...