Low dollar and U.S. downturn threaten European economy

Posted August 1, 2008

The bad news just keeps coming for Europe’s economy. With oil prices still rising and job cuts growing, the German economy also looks like it may soon be in trouble. The country’s dependence on exports has made its economy particularly vulnerable.

by Alexander Jung and Michael Sauga, Der Spiegel
Baltimore — (TFN): Germany’s most important economic indicator, the Ifo Business Climate Index, released its latest report, which “dropped like a rock,” as one Frankfurt banker put it. Analysts had forecast a decline to 100 points, but it’s fall to 97.5 suggested the “economic upswing is coming to an end,” Ifo President Hans-Werner Sinn said.

The raft of bad economic news for Germany continued into this week. After the Ifo report’s release, Germany’s second-largest industrial concern, Daimler AG, announced profits had drastically collapsed — an announcement that caused its share price to take an 11.5 percent tumble. Finally, Deutsche Bank, Germany’s biggest financial institution, announced that profits had fallen by 63 percent during the second quarter.

Meanwhile, this Thursday the euro zone reported 4.1 percent inflation for the month of July, up from 4 percent in June and representing the highest level of rising costs registered since the European Union began gathering such statistics for the euro-zone in 1997. The European Central Bank’s preferred target for inflation is 2 percent.

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