Fears of a recession grow in Germany after the investor sentiment index dropped unexpectedly in the largest European economy.
Reports from the Centre for European Economic Research (ZEW) on Tuesday say the investor confidence shows a negative outcome of a forecasted increase for November.
The index dropped to minus 15.7 points in November, which a poll had predicted to increase from October’s result of minus 11.5 points.
ZEW’s chief, Wolfgang Franz, says this directly relates to the crisis in the eurozone, which has impacted “the German economy via foreign trade and lack of confidence.” Franz added the situation will dwell on Germany’s economy “during the next six months.”
Annalisa Piazza, a New Strategy economist, says Europe’s economic powerhouse is expected to be resilient in the short-term, but in the long-term “weakness is certainly likely to prevail."
Funding most bailouts for the debt crisis-hit countries in the eurozone, Germany has been the backbone of the 17-country joint economy. However, analysts warn that Germany will eventually collapse under the pressure of the three-year eurozone debt crisis.
On Thursday, provisional data on Germany’s growth will be released. Germany had a growth increase of 0.5 percent in the first quarter of 2012 while in the second quarter the figure slumped to 0.3 percent.
Germany’s central bank warned last month of the declining trend for Germany’s growth and said it may slip toward the end of the year and could even get worse.