- Hans-Werner Sinn, Ifo president
ECB's year-long examination of banks asset strength and ability to withstand economic turbulence showed that 25 banks including nine Italian failed stress test, with capital shortfalls totalling 25 billion euros. Half of those had already taken actions to remedy their alleged failings, while others have nine months to shore up their finances or risk being shut down. However, the Euro zone's largest banks have increased their capital buffers by 200 billion euros since plans for the test were first announced last year. The fear of failure that drove those amendments is more important than the fact that 25 banks have failed the stress test. In the meantime, the mood among German businesses deteriorated again in October, as growth concerns in the Europe's largest economy influenced the overall economic sentiment. Germany's IFO business confidence barometer declined to the lowest level in nearly two years, with the corresponding index falling to 103.2 in October down from 104.7 in the previous month. The Current Assessment sub-index dropped to 108.4, following a figure of 110.5 a month ago. Moreover, the Ifo Expectations Index, which indicates firms' projections for the next six months, came out at 98.3, down from 99.3 in September. Germany's export-oriented economy is suffering from sanctions by the EU and the U.S. against Russia and instability in the Middle East. A slowing economy in China, Germany's third-largest trading partner, and subdued demand from its Euro region neighbours are adding to risks.
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