German business morale worsens in June

German business morale worsens in June

German business confidence weakened for a second straight month in June. Greek debt crisis is hitting corporate boardrooms across Europe's largest economy.

Based on a monthly survey of some 7,000 firms, Ifo's business climate index dropped to 107.4 in June from 108.5 in May. That was its weakest reading and was below the Reuters consensus forecast for a reading of 108.1.

Although German economic growth is supported by record-low unemployment, ambiguity over the unity of the euro area has obscured the outlook. The country could miss debt repayments and ultimately be forced out of the bloc if the region’s governments fail to reach agreement with Greece on reforms to unlock bailout payments.

James Howat, an economist at Capital Economics Ltd, said, “Worries about Greece may be weighing on Germany in London. Given that the German economy is being buoyed by extremely loose monetary policy, a weak euro and a drop in oil prices, even expansions of 1.5% a year are hardly spectacular”.

The survey showed that Ifo’s measure of current conditions fell to 113.1 in June from 114.3 in May. Greece’s latest reform proposals would be discussed by Euro-area finance ministers in Brussels on Wednesday.

European leaders want to sign a deal at the end of the week at an already scheduled gathering. This would lay concrete on the way for the disbursement of bailout funds.

The DAX Index of German stocks were at 11,536 at 10:26 am Frankfurt time. The euro was 0.4 percent higher at $1.1215.

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