Germany close to recession as ECB admits recovery is weak

By Ambrose Evans-Pritchard
The Telegraph, London
Thursday, August 7, 2014

German bonds yields plunged to a historic low and two-year rates briefly fell below zero on Thursday on fears of widening recession in the eurozone and a flight to safety as Russian troops massed on the Ukrainian border.

Yields on 10-year Bunds dropped to 1.06 percent after a blizzard of fresh data showed that recovery has stalled across most of the currency bloc, with even Germany now uncomfortably close to recession.

Commerzbank warned that the German economy may have contracted by 0.2 percent in the second quarter and is far too weak to pull southern Europe out of the doldrums.

Industrial output fell 1.5 percent over the three months. The DAX index of equities in Frankfurt has dropped 10 percent over the past month and is threatening to break through the psychological floor of 9,000.

Mario Draghi, head of the European Central Bank, said the recovery remained “weak, fragile, and uneven," with a marked slowdown in recent weeks on escalating geopolitical worries over Russia and the Middle East.

He said the ECB, which on Thursday held benchmark interest rates at 0.15 percent, "stands ready" to inject money through purchases of asset-backed securities and quantitative easing if needed, but would not take further action yet even though inflation had fallen to 0.4 percent. ...

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http://www.telegraph.co.uk/finance/financialcrisis/11020183/Germany-clos...