Investor confidence falls to lowest level in three years

European investor confidence dropped to the lowest level in more than three years in June as the euro region’s debt crisis weighs on the economic outlook.

An index measuring sentiment in the eurozone economy fell to minus 28.9 from minus 24.5 in May, the German-based research institute Sentix said. That’s the lowest since May 2009.

Economists had forecast a decline to minus 30, the median of eight estimates in a Bloomberg News survey shows. A gauge of expectations slipped to minus 22.5, while a measure of current conditions dropped to minus 35.

European governments are struggling to rein in a sovereign debt crisis that’s now threatening to push Spain and Cyprus into seeking bailouts.

While the 17-nation eurozone economy narrowly avoided falling into recession in the first quarter, unemployment has reached the highest level on record, manufacturing output contracted for a tenth straight month in May and the currency has plunged to close to a two-year low against the US dollar.

“The euro crisis is increasingly creating real problems for euro-area economies,” Sentix said.

“The development in the euro region also has an increasingly negative impact on growth engines” like Germany and the US “which should now challenge the central banks.”

European Central Bank policy makers meet in Frankfurt this week and will publish their interest rate decision tomorrow.

President Mario Draghi will present new growth and inflation forecasts and announce whether the ECB will continue to lend banks unlimited liquidity at its benchmark rate, currently at a record low of 1%.

Sentix said 860 investors participated in the survey, which was conducted between May 31 and June 2. The results are never revised.