Germany Hits a Wall

The chances that Germany can steady the overall Europe economy have been reduced to almost nothing. As a matter of fact, there are more and more arguments that the country has tipped into recession. The latest of these is the the Ifo Business Climate Index for German industry and trade. It fell for the fifth consecutive month in September.

Ifo reports:

The companies surveyed are again less satisfied with their current business situation. They also expressed greater pessimism about the future. The curbing forces on the German economy continue to prevail.

The business climate index dropped from 102.3 in August to 101.4 in September. Last April the figure was 109.7. The business expectations index fell to 93.2 in September down from 94.2 in August. The index was at 106.2 in April as well.

The drop almost certainly will add to the resistance many German voters have to Angela Merkel’s plan to use Germany economic resources to bail out other nations in Europe. A recent poll showed that many Germans would not be concerned if Greece left the European Union. Merkel faces resistance among political parties other than her own, and national elections are less than a year away.

Merkel has begun to drag her feet against some of the bailout provisions suggested by other countries, particularly France. Bloomberg reports:

Chancellor Angela Merkel and President Francois Hollande underlined Franco-German disagreement over the weekend as they clashed on a timetable to introduce joint oversight of the region’s banking sector, with Merkel rebuffing Hollande’s appeal to activate it “the earlier, the better.”

The Bundesbank continues to object to the European Central Bank plan to buy large amounts of the debt from nations that agree to bailout plans as a way to bring down the borrowing costs of those countries. Add that to Merkel’s resistance and Germany could still block any near-term bailout programs.

Germany’s economy continues to be mired in economic difficulty that gets worse by the month. It likely will look to its own needs now, well before those of its neighbors.

Douglas A. McIntyre