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Last Updated: Thursday, 25 November, 2004, 11:52 GMT
German business confidence drops
Volkswagen cars off the production line
There are concerns that strong euro prices will hurt German exports
Business confidence in Germany, Europe's largest economy, has fallen to its lowest level in more than a year, over concerns at a strengthening euro.

High oil prices also helped push down the Ifo research institute's monthly index from 95.3 to 94.1 points, Ifo president Hans-Werner Sinn said.

The fall was steeper than expected - analysts had forecast a fall of 0.5.

Economy minister Wolfgang Clement admitted the German economy was weak but said it was recovering.

Speaking in parliament after the Ifo figures were released, he said Germany's stagnation was over.

"We are on the way to breaking through the economic weakness," Mr Clement said. "We are heading up and will continue to head up."

Euro impact

The latest figure for the closely watched index, which is based on a monthly survey of 7,000 companies, is the lowest since September 2003. It is also the third drop in four months.

The euro has hit a series of new records against the US dollar in recent weeks, amid worries over the US trade and budget deficits.

US oil prices hit an all-time high of more than $55 a barrel in late October, before falling much as $10 lower.

Daniela Etschberger, an economist at Dresdner Kleinwort Wasserstein, told Reuters news agency that it could not be long before Germany's manufacturing sector started to feel the pinch.

"It can't be long now before export expectations are scaled back," she said. "The medium-term outlook for economic growth is not rosy."

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