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Friday, 22 June, 2001, 09:12 GMT 10:12 UK
German business confidence slumps
Workers in a German car factory
The mood in German industry is grim
Germany's IFO index, a key measure of business confidence, has fallen sharply for the fourth month in a row.

The news will be another blow to the EU's single currency. Germany's is the eurozone's largest economy, and if it flags, the eurozone's eleven other countries are likely to suffer as well.

The IFO's key West German business climate index fell to a two-year low of 90.9 in May, down from April's 92.5, and 101.3 a year earlier.

Germany's blue-chip DAX stock market index bounced slightly early on the news, as traders hoped the IFO figures might spark a cut in European interest rates.

"Germany is flirting with recession," said Rainer Guntermann, economist at Dresdner Kelinwort Wasserstein.

Earlier this week Werner Mueller, Germany's economics minister, warned that his country's growth might have slipped to zero for the three months April, May and June.

Industrial gloom

The IFO index, compiled by Germany's Institute for Economic Research, is based on a monthly survey of 7,000 German enterprises.

Gernot Nerb, who is in charge of the IFO survey, said he did not expect a reversal of the downward trend in the next two or three months.

He pointed out that the part of the index that attempts to gauge future expectations had also fallen in the latest figures.

"That is not a good signal for a recovery around the corner," he said.

Running counter to the gloomy trend, the IFO index for Eastern Germany ticked up in May to 104.7.

 WATCH/LISTEN
 ON THIS STORY
Holga Farinkrung, Economist UBS Walburg
"A combination of factors have dragged Germany down"
See also:

22 Jun 01 | Business
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19 Jun 01 | Business
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02 May 01 | Business
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