Lower dollar drags Euro zone economies into recession – German business confidence fell in June to the lowest level since 2005
Fred Day
Jun. 23, 2008

Germany is slumping into a recession. Japan is already soft. US is on the verge of a recession. The lower dollar dragged the last hope of world economies into its knees. The euro dropped the most versus the dollar in more than a week as German business confidence fell in June to the lowest level since 2005, reducing bets the European Central Bank will increase borrowing costs this year.

Europe's manufacturing and service industries unexpectedly contracted this month. The Swiss government reduced its economic growth forecast for next year.

German business confidence drop is very significant. The econometric and quantitative models were predicting for along time that the Euro zone economies were headed for a major recession. The German economy was the most resilient. It seems lower US dollar has made it weak too.

The deceleration in the euro-area economy will continue to be felt, and that leaves the ECB with a big problem. The slowdown in economy and increasing inflation is the last thing ECB wants to see.

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