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Debt Crisis Persists in Europe

Debt Crisis Persists in Europe

September 24, 2012 – Businesses in Germany are not seeing many reasons for optimism as they are faced with the continuing debt crisis throughout Europe. IFO Institute, based in Munich, on Monday said that for the fifth straight month its Business Climate Index dropped during September. The Index hit its lowest point since February of 2010.

In August, the manufacturing sector experienced a slight recovery, nevertheless in September it cooled off significantly. Companies are less satisfied with the position they are in currently and expressed more pessimism about the upcoming months.

The economy in Germany is the largest in the eurozone and exports are its biggest income producer. However, demand for goods produced in Germany has declined as the debt crisis has carried on and is weighing on the economic activity throughout the region.

The Index’s results showed businesses are very concerned with the continual slowdown and outlook for the country’s exports was negative, a trend that started to take hold in August. However, there were some bright spots, including reports from wholesalers and retailers that showed improved business in each of those sectors.

The region was able to pass a huge hurdle a few weeks ago when a German high court allowed the bailout fund – the ESM – to be created and move forward.

The fund will have more than $650 billion in capital, which will be paid in by the different governments during a period of years. It will be used to provide loans for members of eurozone who have financial troubles.

Many economists however, have warned that the new ESM will not solve the underlying problems in the region, where a number of countries struggle to reduce public debt during a deepening recession.

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