The International Monetary Fund has slashed its growth forecast for Germany in half as the Euro crisis continues to weigh down Europe’s largest economy.
The IMF said that declining business investment and the ongoing recession in the Eurozone has caused the German economy to shrink and expects the nation’s economy to grow by just 0.3% in 2013. Prior to Monday’s decision to cut Germany’s forecast; the group had originally been forecasting the German economy to grow by 0.6%.
“The uncertainty, mainly surrounding prospects for the euro area and the ongoing recession in the region, have led to declining German exports to the region as well as a sharp pull back in business investment,” the IMF said in its report.
The Fund also warned that Germany faces further risks to its growth prospects.
“Should the alleviation of uncertainty and an unexpected gradual recovery in the rest of Euro area fail to materialise, growth can be expected to remain below its potential for longer, leading to a widening of the output gap which would eventually result in slack in the labour market.” It added.
Joerg Asmussen, a German economist who sits on the board of the European Central Bank, has also warned that Europe’s largest economy risks becoming the “sick man of Europe” if it does not implement widespread reforms. Last month, Mr Asmussen said Germany needed to target reforms at the education system and energy and infrastructure sectors, as well as tackle income inequality.
As well as woe for Germany an interview with Henri de Catries the chairman and chief executive of Axa, the world’s largest insurer by premium income, painted a bad picture of the French economic situation. Mr de Catries told the Telegraph that France is in a worse state than Britain was in the 1970’s. He is concerned that France’s problems are causing an exodus of young talent, a significant fall in foreign investment in France and reduced inward investment by French companies, too.
There are some signs of improvement as seen in Monday mornings improved PMI data for the Eurozone. PMI rose to 48.3 in May, up from the 46.7 recorded in April. A number below 50 signals a contraction.
Current Euro (EUR) Exchange Rates
The Euro/US Dollar Exchange Rate is currently in the region of: 1.3035
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8517
The Euro/Australian Dollar Exchange Rate is currently in the region of: 1.3400
The Euro/ New Zealand Dollar Exchange Rate is currently in the region of: 1.6158
The US Dollar/Euro Exchange Rate is currently in the region of: 0.7678
The Pound Sterling /Euro Exchange Rate is currently in the region of: 1.1727
The Australian Dollar/Euro Exchange Rate is currently in the region of: 0.7401
The New Zealand Dollar/Euro Exchange Rate is currently in the region of: 0.6126
(Correct as of 16:05 pm GMT)