German Economy to Stall in Second Half on Debt Crisis, BDB Says

The German economy will fail to grow in the second half of this year as a weakening world economy and concerns about the euro region’s sovereign debt crisis damp exports and investments, bank economists said.

The economy, Europe’s biggest, will expand 0.9 percent this year and 1.1 percent in 2013 provided turmoil in Europe subsides, the BDB association of German banks said today in an e-mailed report, citing forecasts by 14 chief economists from lenders including Deutsche Bank AG and Commerzbank AG.

“The European government debt crisis is damping the German economy,” BDB board member Hans-Joachim Massenberg said in e- mailed remarks, citing shrinking equipment spending since the start of the year. “Many companies are holding back with their investments at the moment.”

German economic growth slowed to 0.3 percent in the second quarter from 0.5 percent in the first and the Bundesbank, Germany’s central bank, last month said the economy may cool further. Business confidence fell for a fourth straight month in August, the Munich-based Ifo institute said Aug. 27.

A recovery at the end of the year will be “moderate,” said the BDB, which in its last outlook, published in February, predicted growth of 0.5 percent this year and 1.5 percent in 2013.

Massenberg said the BDB views the European Central Bank’s announced bond-buying program with “very mixed feelings” as it’s “questionable” in regulatory policy terms and may fail if governments refuse to carry out policy changes to improve their countries’ competitiveness.

On the other hand, ECB President Mario Draghi’s announcement and the decision by Germany’s constitutional court to let the future permanent bailout fund come into existence have lessened the risk of a breakup of the euro region, Massenberg said.

To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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