German businesses ‘finally get crisis feeling’

Eurozone gloom deepened on Friday with data showing that the debt crisis has pushed business confidence in Germany, Europe's biggest economy, to the lowest level for more than two years.

German businesses 'finally get crisis feeling'
Photo: DPA

Compounding an unexpectedly sharp drop in investor sentiment earlier this week, the Ifo economic institute’s closely watched business climate index fell to 105.3 points in June from 106.9 points in May.

It is the second month in a row that the index has fallen and brings the barometer to its lowest level since March 2010.

“The recent surge in uncertainty in the eurozone is impacting the German economy,” said Ifo president Hans-Werner Sinn.

“While companies’ assessments of their current business situation brightened slightly, they scaled back sharply their expectations for the next six months,” Sinn said.

Ifo calculates its headline index on the basis of companies’ assessments of their current business and the outlook for the next six months, with 100 being the long-term average.

And while the sub-index measuring current business edged up to 113.9 points in June from 113.2 points in May, the outlook sub-index tumbled to 97.3 points from 100.8 points, its lowest level since October 2011.

The decline in the Ifo index this month was slightly steeper than expected.

Berenberg Bank economist Christian Schulz said a breakdown of the data painted a mixed picture across the different sectors.

Manufacturing was hit by a deterioration of the export outlook, “a clear indication that companies feel the impact of the euro crisis elsewhere,” he said.

By contrast, the most domestically-oriented sectors – retail and construction – reported a slight improvement in the business climate.

“The key for the economic outlook is the management of the euro crisis,” Schulz said.

“Based on very sound economic fundamentals, the German economy can start expanding at trend growth rates again once this wave of the euro crisis is brought under control.

Next week’s EU summit and the subsequent ECB meeting on July 5 stand a decent chance of achieving that,” the analyst argued.

If EU leaders in Brussels make progress on a banking union and growth initiatives, “the ECB will probably complement that by following other central banks across the world in cutting rates and providing more liquidity to the banking system,” he said.

ING Belgium economist Carsten Brzeski said “German businesses have finally got the crisis feeling.”

The German economy “is clearly slowing down and a contraction of the economy in the second quarter looks possible,” the analyst warned.

While the “German ship is more solid than all other eurozone ships, latest indicators have been good reminders that even the most solid ship can capsize in a rough thunderstorm,” he said.

Capital Economics economist Jonathan Loynes said that, coming after the steep drop in the ZEW investor confidence survey earlier this week, the Ifo data “reinforce the message… that the eurozone’s growth engine has stalled.”

While the index remained well above the lows seen back in 2008 and 2009, the survey suggests “that the German economy is doing little more than stagnating at the moment, and may even be contracting,” Loynes said.

In short, it was “another blow to hopes that strong growth and higher inflation in Germany would help to solve the eurozone crisis,” the analyst concluded.

Natixis economist Constantin Wirschke similarly saw the Ifo data as an indication that “Germany cannot decouple from the eurozone crisis.”


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‘I’d do it again’: Refugees reflect on their journey to Germany five years on

German Gracia Schuette and Syrian Aeham Ahmad both had their lives changed forever by Angela Merkel's decision in 2015 to leave Germany's doors open to hundreds of thousands of refugees.

'I'd do it again': Refugees reflect on their journey to Germany five years on
Syrian pianist Aeham Ahmad while still living in a hostel in 2016. Photo: Daniel Roland/AFP
In August of that year, Schuette joined thousands of volunteers serving ladles of hot soup to exhausted migrant families arriving at Munich's main train station.
Having been held in Hungary after travelling the length of Europe, trains overflowing with refugees from Syria, Iraq and Afghanistan had begun arriving at the station in a seemingly endless convoy.
Ahmad was a passenger on one of them. The Syrian pianist with Palestinian roots arrived in Munich on September 23.
A month earlier, he had left Yarmouk, a sprawling neighbourhood in the south of Damascus, after swathes of the area were occupied by the Islamic State (IS) jihadist group.
He left behind his wife and two boys, still too young to embark on such a perilous journey.
Now 32, Ahmad has built a career for himself that involves travelling all over Europe and as far afield as Japan to give concerts.
At the station in Munich, where the volunteers once served hot soup, a Covid-19 test centre now stands.
Gracia Schuette stands at the main train station in Munich, the arrival place of many refugees in 2015. Photo: Christof Stache/AFP
Schuette, 36, says the experience changed her attitude to life and taught her “gratitude and the awareness that despite everything that happens in Germany, it is still a very safe country”.
Ahmad speaks to AFP from a train heading to the north of Germany, where he is due to give a concert.
He remembers his first days in Germany as a time of great confusion. Like tens of thousands of other Syrians arriving in the country, he had only one word on his lips: “Alemania!” — Germany.
“After I arrived in Munich, I was sent to several emergency reception centres and then to Wiesbaden” near Frankfurt, where he and his uncle were given a room in a hostel, he says in a mixture of English and German.
He remembers the “extreme kindness” shown by volunteers like Schuette — “that community of people who said, 'We have to help'”.
For Schuette, it was important to feel that she was “not just a spectator” watching events unfold but willing to “act decisively” by helping to distribute basic necessities or set up camp beds.
Today, she works as an administrator for a kindergarten. But she has maintained her commitment to helping refugees — so much so that she has even taken three young people into her home, one of whom still lives with her.
Having been granted refugee status a year after his arrival in Germany, Ahmad was joined by his wife and children.
The family have since moved to Warburg, a town in northwestern Germany, and seven months ago welcomed a new baby girl.
While still in Syria, Ahmad had made a name for himself on social media with videos of songs performed amid the ruins of his ravaged home country.
'No accent'
In Germany, he began to sing songs about homesickness, with the aim of raising awareness in his new country and the rest of Europe of “this stupid war” that has devastated Syria for more than nine years.
Today, he aspires to “bring cultures together, to create a dialogue between Eastern and Western music”.
Having given more than 720 concerts, he has at times felt exhausted. But “anything is better than living off state subsidies” as he did during his first months in Germany, he believes.
If Schuette could go back and do it all again, she would.
“I don't think I would be someone who just says, 'It's going to work out and everything's going to be great.' You have to be realistic,” she said, pointing to the difficulties of integration. “But there's no doubt about it: I'd do it again.”
Ahmad, too, avoids painting a rose-tinted picture of his story. His generation, he says, will be scarred for life by the horrors of war and the  difficulties of adapting to life in exile.
But there is pride in his voice as he reveals that his two sons already speak German “without the slightest accent”.