The locomotive of Europe continues to slow down. According to the latest data from the Bundesbank, the German economy will lose momentum again at the end of the year: the debt crisis weighing on the Eurozone has definitively affected German prospects as well.
The Central Bank of Frankfurt has communicated that companies active in a growing number of sectors do not expect a rapid recovery in activity. “The economy currently presents a mixed picture, which is likely to slow further towards the end of the year“writes the Bundesbank in its November report.
At the beginning of the month, the number one of the ECB, Mario Draghi, had warned that "Germany has so far been largely sheltered from the difficulties that have hit other areas of the eurozone, but the latest data indicate that these developments are starting to affect the German economy". A trend that shouldn't come as a surprise, given that "trade within the euro area contributes 40% of Germany's GDP and about 65% of foreign direct investment comes from other euro countries".
Meanwhile, from President of the Bundesbank, Jens Weidmann, two clear political messages have arrived. Once again these are criticisms of the operations put in place by Brussels and the ECB. First, Weidmann said that "there should be no guarantees for the survival" of banks in financial difficulty (in this case the reference seems to be the crisis of the Spanish banking system).
Secondly, Weidmann reiterated that, “if done correctly, the banking union can be an important pillar even in supporting a stable monetary union. But that's not the key to solving the crisis, and we shouldn't expect it to be."
According to the number one of the Bundesbank, the current problems are consequences of past errors, committed at national level, and therefore "must be resolved by the respective governments". Spreading these risks through a banking union - Weidmann underlined - would be the equivalent of a fiscal transfer and would be in contradiction with the purpose of the banking union itself. Furthermore, such an action could create incentives for countries not to reform their financial systems.
