Business Confidence Stabilizes in Europe's Key Economy

It seems that no news really is good news. The German index of business confidence conducted by the LFO Institute didn’t change much this month -- At present, that passes for good news. The index fell through the summer and tumbled in August to 108.5. It is now slightly lower at 107.5,  the lowest point since June 2010.

The reality is that German businesspeople are none too enthused about what is happening in Europe as a whole. Still, they are slightly more upbeat about their own prospects and that of Germany as a whole. There is a sense that German businesspeople are trying to set aside the wrangling at the political level as they just go about their business. They are seeing some recovery in demand from the Asian economies, but nothing like what they saw earlier in the year.

The German economy is key to improvement in Europe as a whole, and there is nothing to suggest that happier times are imminent. The driving force for the German economy for the past two to three years has been the export sector, which slowed due to the decline in global trade. Germany still exports mostly to the other nations of Europe and the United States, and none of these economies have been robust. China, India and Brazil are more important than they have been in the past, but they are still secondary to the prime markets. The German business community has all but given up on the rest of Europe to rebound.

Meanwhile, solutions that continue to be put forward as far as Greece is concerned by the nations now carrying financially, including and especially Germany, all say the same thing: more cuts, more tax hikes, more austerity. This may make sense from an economic point of view, but politically this is a disaster. Greek citizens have reached the breaking point and threaten massive civil unrest. The unions are striking even in the sectors that are generally well-run and profitable. The fact is that Greece can’t be pushed much further.

Source: NACM Economist Chris Kuehl

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