German Business Confidence Sinks As Eurozone Debt Crisis Rages
The ifo index of 7000m German businesses and their perception of business trends registered a decline from 103.2 in July to 102.6 in August. The contraction in business confidence was more than analysts had forecast, and is a sign of growing worry among business decision-makers in Germany as many large markets within the Eurozone for German goods face a profound economic crisis related to the ongoing debt crisis.
While Germany remains the largest economy within the Eurozone, the ifo index for Augusts shows that Berlin is not immune to the impact of the worsening Eurozone debt crisis. There are many reasons for worry in Germany. Not only is the European sovereign debt crisis inflicting economic damage; Germany is paying a high fiscal price for being the lender of last result within the Eurozone. German taxpayers are being asked to pick up a major portion of the cost of bailouts for Eurozone economies mired in the debt crisis. A combination of diminished exports to Eurozone members and fiscal damage to Germany’s balance sheet does not bode well for future prospects for Germany’s economy.