German business confidence falls amid Greece debt crisis
Business confidence in Germany has fallen for a second month amid fears about Greece’s potential exit from the eurozone, which may have unexpected consequences for other member states of the bloc.
Based on figures released by the Ifo Institute on Wednesday, the institute’s Business Climate Index for Europe’s economic powerhouse dropped to 107.4 points in June from 108.5 points in May. Economists had anticipated a fall to 108.1.
The figures showed that concerns about Greece “may be weighing on the eurozone’s largest economy,” said James Howat, an economist at Capital Economics in London.
Ifo’s measure of current conditions plummeted from 114.3 in May to 113.1 in June while the index measuring expectations for the next six months also fell to 102.0 from 103.0.
Germany’s economy is currently in a relatively good shape as the country has a low unemployment rate. However, if Greek officials fail to reach an agreement with its international creditors over the financial crisis in the cash-strapped country, Athens could miss debt repayments and finally leave the 19-member eurozone. This scenario could pose a threat to the economies of other members of the euro area.
“Given that the German economy is being buoyed by extremely loose monetary policy, a weak euro and a drop in oil prices, even expansions of 1.5 percent a year are hardly spectacular. And if Greece’s crisis deepens, the economy may even lose steam,” Howat stated.
Greece received two bailout packages worth a total of €240 billion (USD 272 billion) from the so-called troika of creditors in 2010 and 2012, following its 2009 economic crisis.
For months, Athens has been negotiating with the lenders in the hope of reaching a deal that does not require harsh austerity measures. Both Athens and the international creditors have rejected proposals made by either side so far.
MR/HSN/HRB
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