As German Business Morale Drops To 9 Month Low, Concerns About Health Of Europe's Core Economy Emerge

Tyler Durden's picture

While futures are still drunk on the euphoria from Europe's bailout, and the EURUSD has rebased modestly higher by 200 pips to 1.44, the actual "cash flow" issues that are at the base of every modern problem are once again resurfacing, this time at key EFSF guarantor Germany, whose July Ifo business climate index, based on a monthly survey of some 7,000 firms, plunged to 112.9 from 114.5, well below expectations of 113.8, a nine month low in this closely watched indicator. "Germany has been the star performer in the industrialised world since the end of the financial crisis, and economists were split on whether Friday's data points to a sharp slowdown or just a moderate easing from unsustainably strong growth in the first part of 2011." Coming on the heels of yesterday's sharp decline in European PMIs confirms that while Europe has perfected the art of wealth redirection, primarily in the direction of bank balance sheets, it may need to soon grapple with the far more difficult task of stimulating the best performing industrial economy since the GFC. Because all it would take for the latest European "bailout" to fold would be for a rating agency to say that they are now shifting their attention to the creditworthiness of Europe backstopper supreme: Germany.

Per Reuters:

Germany has been the star performer in the industrialised world since the end of the financial crisis, and economists were split on whether Friday's data points to a sharp slowdown or just a moderate easing from unsustainably strong growth in the first part of 2011.

The euro zone's manufacturing Purchasing Managers' Index showed growth in the sector came to a standstill this month, while the equivalent services index sank to a 22-month low.

"The Ifo index too is increasingly pointing to slower economic growth in Germany -- without meaning that the recovery is immediately going to keel over," said Commerzbank economist Ralph Solveen.

Germany's economy grew by 1.5 percent in the first three months of the year, but economists polled by Reuters expect this to slow to a quarterly average of 0.5 percent for the rest of the year, still a strong rate of expansion by German standards.

Ifo economist Klaus Abberger was also relatively upbeat, saying that Germany's economy was set for a soft landing. The euro zone crisis had relatively little impact on Germany to date, although export expectations were down sharply, he added.

Other economists were concerned that Friday's Ifo data could presage a sharper slowdown. The expectations component of the data was down, and construction was the only sector to report an improvement in business conditions.

"We suspect that July's fall is the start of a sharp downward trend," said Jennifer McKeown of Capital Economics. "The strong euro was taking a toll on exporters. And with German taxpayers becoming ensnared in the euro zone peripheral debt crisis, it seems unlikely that consumers will be prepared to pick up the slack."

Combined with recession in the periphery of the euro zone, Germany's weakening growth meant the bloc as a whole would barely expand next year, McKeown added.

The paradox is that while the Greek bailout should have been accompanied with further EUR weakness, it has resulted in a surge in the common currency which in a perverted way is an unwanted outcome for Germany's manufacturing base which now it can be safely said is carrying the burden of the Euro experiment entirely on its own shoulders. However, Germany's loss is China's gain, which can continue exporting a record amount of trinkets to the EU. So when Germany does fold in a few short years, one can only hope that China will return the favor and expand the EFSF to the ~€5 trillion that will be needed to prevent a German insolvency, sapped after years of carrying, and funding, the PIIGS.

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chump666's picture

and greek cds tighten while germany sinks. the german media/lawmakers/taxpayer revolt overdrive

wsmith's picture

Fuck the huns in the ass!

They need the Euro to survive.

But what the fuck do I know?

Anyway  so long.

And God bless all you Marxist cocksuckers.

DogSlime's picture

"Germany has been the star performer in the industrialised world since the end of the financial crisis..."

Since the END of the financial crisis???

This whole planet has turned to bullshit.

Nuke the place and get it over with.


chump666's picture

and greek cds spreads tighten...german media wil eat this up.  

Re-Discovery's picture

It is still shocking to me that Germans are supporting this deal.  If ever there was a time for them to say 'stuff it' to the rest of eurozone, and remain the only one to pick up the pieces, this is it.

Contrary to easy consensus, Germans do NOT need Euro.  They actually make stuff people wnt (one of the few western countries that still does.)

Internet Tough Guy's picture

Of course Germans need the euro; if they didn't they would leave. Obviously they figured out that leaving and suffering hyperdeflation would be bad. When will ZH figure it out?

Re-Discovery's picture

Leaving and requiring collateral for all extensions of further credit would make them richer in the long term than the rest of the zone combined.  Hyperinflation?  That is what they will get if they support this crap.  Germany would get all the benefits of deflation (lower prices) and demand for products.  Wealth transfer would go in their direction if they rreject, not away from it.



HTZMR's picture

Amazes me too. But the political elites in Germany take a completely different approach to Europe than the electorate they are supposed to represent. And the opposition would only be more willing to fork over taxpayer money in the interest of Europe. Given a chance, there is a very high likelihood that Germans would abandon the euro. After bailing out the East, and saving for the likely demographic timebomb that will substantially reduce pension payouts in the future, they cannot and do not want to afford rescuing insolvent European countries - especially those like Greece that never fulfilled the requirements for the euro, cooked the books and engaged in profligate bureaucratic largesse. Over and over and over again. But there is absolutely no sign of anything resembling a True Finns or National Front party, and that will remain the case as long as unemployment doesn't head back to 4 million. One thing tho, he mentioned "hyperdeflation" -- best proxy for possible appreciation of new deutschmark would be the swissie gains vs euro

wsmith's picture

You dirty Marxist cocksuckers!

The Huns support the deal because they need the deal.

I'm wrong?

Let those Hun bastards try selling their shit with the Kraut-Mark.

Fuck those Hun bastards.

And fuck you, too.


Re-Discovery's picture

You may want to 'f#$k those hun bastards' but don't expect them to do it to themselves.  Merkel is a proxy for German bankers.  I have a feeling the German people will revoke that proxy shortly.

wsmith's picture

You are wrong, my friend.

The Huns will go along.

Trust me on this.

They need the Euro.

scratch_and_sniff's picture

Have you washed out your water filter yet? It sounds like you forgot?

KlausK's picture

What brought you here, angry friend? Tired of playing with your "proboard" all alone ?

chump666's picture

very soon, whole thing will unwind like the conjob it is...german business conditions are going down the toilet.

Azannoth's picture

Germans are brainwashed(like most of the West) by decades old propaganda of unity and solidarity with the world, this is slowly shifting, people on the streets begin to notice that they are being screwed royaly, but the people who see things more clearly are only in their 20tys, so expect at least a decade more of the same from Germany

Bang Dae Ho's picture

said it already today: Germans (population and politicians in rare unity) are the same denial-can-kickers as the rest of the west.

i-dog's picture

"So when Germany does fold in a few short years"

Unless the 'European Experiment' is quickly terminated, Germany (along with the rest of Europe) will fold in well under 2 years.

IMO, the banksta gangstas are just trying to keep the balls in the air until they have finalised preparations for a "cashless currency" throughout Europe.

Oh regional Indian's picture

i-dog, I agree with your time-line projection. But again, what many people do nto realize is that a nation's coffer's get full or emptied via rivers of money that flow at invisibel levels for reasons not really known to us. The German military industrial complex will do very well in the coming times. Which by the way, is a huge chunk of successful german industry.

Add the fact that they are all over growing markets.

Here is a big sign as an example. Mercedes Benz just launched a Billion Dollar capitalized finance arm in India, licking their chops at selling cars that are USLESS in Indian conditions, to Indians who do not know that, via credit.

They may suffer at home, but large multinationals have too many sources of in-come, untapped markets and too many ways to hide it is what I'm saying.





Bang Dae Ho's picture

cars that are USLESS in Indian conditions

wrong. EVERYBODY needs a leather seat setting memory for at least 5 positions. Or do you want a hooker or secret girlfriend sit in the same position as your wife?

i-dog's picture

Large multinationals are each a separate 'country'** on their own, ORI. They decide for themselves if/where any taxes are paid. My Benz was made in factories scattered all over the planet (so even the CFO would have trouble calculating the actual benefit to the German economy)! News Corp apparently received billions in taxes (tribute) from government/s last year.

My point was being made in relation to national citizens of national companies that generate national employment and pay national taxes to maintain their national economies (a quaint concept, I know!). They are fucked ... unless a few countries quickly withdraw from the EU, and thereby cause the rest of the scam to collapse -- before the sheep get slaughtered.

** The NWO will probably rename the United Nations to the 'United Corporations' when they have finished disolving all the redundant sovereign governments. LOL.

Ricky Bobby's picture

Excellent point! The struggle between the global corps and centralized states. Each has its advantages, one thing for sure, peasants need not apply for any consideration. This game is between the elites.

virgilcaine's picture

They focused so much on saving the banks they are missing the approaching depression pt 2..difficult to pay back a loan w/out income or a job for a Country. Co. or Individual.

HITMAN56's picture

so called facts are fraud...they want us to allege and are the witness of change and to counteract...we got to...take the......

Everybodys All American's picture

Well China destroyed the US economy and dollar. Now it's time to take on Germany and the Euro.

lizzy36's picture

China didn't destroy the US economy and the USD. Yanks did.

Ricky Bobby's picture


There was political consensus in US on that issue for sure.

rsnoble's picture

Cool, now that we are back on track with 100% recovery and everyones doing great we can get gas right back to $4.00+ per gallon.  Of course at least 25% of the population doesn't have anywhere to drive to anyhow lol.

rsnoble's picture

Hmmm, maybe that was the plan. Sit everyones ass at home, make the oil last longer.

Monedas's picture

 Bank robbers rob banks.....where the money is, right ?      Socialists are vampire leeches attached to the private, productive sectors heart walls ! What's so hard to figure out, here !    Russia and China have gone so far left they are re-emerging stage right.....and prospering ?    Europe....stupid and in it's left of center dream world is struggling ?    What's so difficult here ? Fecklessness run amock ? Revisionism in a house of mirrors ? Monedas 2011 Get's it......what's your problem......Socialist shit for brains......Neandertwat gene deficient Zimbabwians ? There, you made me say it!

entendance's picture

I wrote it before and write it again:
let's call this sucker's bluff now and see what happens.

supermaxedout's picture

There is a saying in Eastern Europe like this. "When the Germans cant fix it who else can? The IFO index is going up or down. Who cares. Important is, that Germanys Eastern neighbours are still in growing demand for goods and services from Germany as well as Germany is in growing demand for goods and services from its eastern neighbours. And this business model is functioning better and better and neither Poland, nor Czechia nor Russia nor China which is the most far of Germanys neighbour is complaining about Germany. Forward looking enterprises in other EU countries are doing the same as its German competitors. They look eastwards there were the future business is. And this is producing jobs in Europe.

For East-Eurasia Germany is a reliable partner. There exists plans for an autobahn "Berlin-Peking" as well as high speed train conncetions and modern freight train connections.

On the way to China there are countries like Iran, Mongolia, Afghanistan, Pakistan and India. which are all interested in such an economic development. There is enough to do on this planet and there is plentiful business and investing oppurtunities not only for Germany. It seems like everybody is invited to do so but the question is. "Is everybody aloud to do so!"

One must not worry about the ability of Germany to adopt to new developments because this is its biggest strenght.  And fortunately for Germany now they have a very clever and strong woman Ms. Merkel steering through the rough seas.  

Now she promised that Germany is saving the EU and Greece.

Folks its just hollow promises on fiat money just to keep things going for a while. What is important is that Germany can not be blamed to have triggered the final melt down of the financial system. Because then Germany would have received pariah status among the "civilized and democratic nations". There would be a battle cry throughout these "civilized and democratic nations": "Germany again!  They have to be isolated so that they can no longer be a danger for the "civilized and democratic world".

This would have been much expensiver on the long run for Germany, given its dependence of its export driven economy. Damned Merkel she is slicky like an eel.

Everybody is waiting for the US to collapse and this will be the decisive moment. This can happen anytime but it may take another 10 years down the road.. Its only sure that it is going to happen at least from what we know today. Then everybody gets new cards and I dont think the PIIG debt issue is then of further importance. And the German debt and obligations who cares then. It cant be paid back either just like all other souvereign debts in the world.

Germany has only one advantage. It is the ability to compete technologically with other mayor players. The German economy is quite fit and capable at present in the non military sector. And this is the difference between Germany and the US for example. Presently the US and UK is wasting their money and  their brainpower for the wrong sectors. Finance Industry and Military Industry!  This is were the problems sits. The solution is quite simple but the transition time will be very painful. But this is unavoidable. Nobody can take away the pain involved in giant ecomomic restructurings. And it will take time!!

I spell FIAT money as follows: Failure In All Territories!!!  The collapse of the Dollar is going to be the Death Bell of the bloated banking industry which is financing the Military Industry. Hopefully the world stays then away for a while from such wonderful wealth producing financial innovations like, MBS, CDS and so on. And hopefully the banking sector is chained and cut back to the purpose of financing real world civil projects and real innovations. And it should be outlawed that governments can get credit because such credit is just an additional tax which has to be paid later on through increased taxes.

Ricky Bobby's picture

A central planners dream, God must be laughing.

virgilcaine's picture

zombie banks, zombie countries, soon zombie states & cities.  march on zombies.

oogs66's picture

they can borrow from the efsf too