Wednesday, 24 October 2012

Bad economic times ahead for Germany and the euro zone

Germany has over 140 billion worth of these, most  of them  stored  in  New York, London  and Paris

Activity in Germany's manufacturing and service sectors declined for the sixth straight month in October. The economic slowdown in Germany was also confirmed by the Ifo Business Climate Index, which in October also deteriorated for the sixth consecutive month. "The clouds on the German economic sky are darkening", says Hans-Werner Sinn, who heads the Munich-based Ifo Institute for Economic Research.

The problems in Germany, the powerhouse of the euro zone, are not good news for the crisis-ridden euro zone, which is drifting towards a deepening recession. Economic activity in the euro zone has hit its lowest levels since June 2009, according to the October  Purchasing Managers' Index for the 17-nation zone. 

No wonder that more and more German politicians and economists are beginning to question the wisdom of the continuing bail-outs and ECB boss Mario Draghi's plan for unlimited purchases of government bonds to stem the debt crisis. Draghi, who is today to appear before a joint session of three committees of the German Bundestag, will  most certainly be heavily criticized by a number of parliamentarians. 

Another sign of the growing economic unease in Germany are the growing demands that country's gold reserves - the second largest in the world, worth up to 142 billion euros - should be returned to Germany from New York, London and Paris, where they have been stored for a long time. 

What does all this mean for Germany and the euro zone? The short answer: Continued instability. 

(image by wikipedia)

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