- Bundesbank
The Bundesbank reiterated fears surrounding the German economy that geopolitical tensions may jeopardize the economic outlook for Europe's biggest economy, bringing earlier expectations about the resilience of the country's economy into question. Germany's central bank said that sanctions imposed by western countries against Russia, along with counter measures that Russia has enacted, weigh on companies dependent on exports as well as sectors of the domestic economy such as construction. The report is the strongest warning yet from the Bundesbank, which said in the past that economic weakness in the June quarter would be temporary, and signals that forecasts published only two months ago may be too upbeat. Pared with a lack of growth in France and Italy in the period, German prospects threaten to weigh on a Euro area recovery that the European Central Bank is trying to sustain with unprecedented stimulus.
The Bundesbank had forecasted in June that the German economy will expand 1.9% this year and 2% in 2015. That compares with ECB forecast of the Euro zone growth of 1% and 1.7%, respectively. The German economy contracted 0.2% in the second quarter after growing 0.7% in the beginning of the year. The Ifo Institute's business climate index for Germany declined for a third straight month in July after reaching the highest since 2011 earlier this year.
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