German business morale fell for the fifth consecutive month in January, a survey showed, signalling a downturn in Europe’s largest economy where company executives have become pessimistic about future business for the first time since 2012.
The outcome of last Thursday’s meeting of the European Central Bank (ECB) Governing Council was in line with market expectations, with no changes to monetary policy. Thus, purchases of securities under its quantitive easing (QE) programme will continue to run at a rate of €60bn per month until at least September 2016, with interest rates staying at virtually zero.
The weekend suggestion from Simon Harris, the junior finance minister, that income tax should be cut adds momentum to statements made by senior cabinet ministers Michael Noonan and Simon Coveney. If that expectation is not met, then the political consequences will be severe.
German economic growth will show a revised shrinking towards zero for the second quarter of the year, due to the Ukraine crisis and the tough new economic sanctions imposed on Russia — going down from 0.8% in the first quarter — the head of the Munich-based Ifo institute said at the weekend.
The eurozone emerged from an 18-month long recession in the second quarter of this year when GDP rose by 0.3%, the first increase since the third quarter of 2011. This was a double-dip recession as it followed soon after the very severe recession of 2008-2009.