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German business confidence dips

March 22, 2013

A long spell of boosted business confidence in Germany has come to end. A closely-watched barometer by a leading economic think tank showed there was renewed unease about the prospects of eurozone recovery.

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A fork lift moves a container at a ship yard Photo: Klaus-Dietmar Gabbert/dapd
Image: dapd

German business confidence posted a surprise drop in March, the Munich-based Ifo economic institute reported Friday.

It said its index measuring the mood in German boardrooms slumped to 106.7 points this month, down from a February reading of 107.4 points. The decline ended four consecutive monthly gains in the barometer.

Ifo President Hans-Werner Sinn said there was no need to panic.

"The German economy is holding its own with a good domestic performance in a difficult environment," he said in a statement.

Volatile environment

The survey of 7,000 executives saw a drop in both of its indices, gauging managers' business expectations and highlighting the assessment of their current situation respectively.

The dent in business confidence was attributed first and foremost to new problems in the debt-stricken eurozone, including Italy's inconclusive election and drawn-out endeavors to save Cyprus from looming bankruptcy.

Italy’s Election, France’s Faltering Economy, and Cyprus on the Brink

"If Cyprus were to go bust, you can expect a deterioration of the eurozone crisis which would negatively impact German exports," Deutsche Bank economist Oliver Rakau told the Reuters news agency.

The German economy had gotten off to a surprisingly slow start in the new year. Industrial orders dipped by 1.9 percent in January as demand in crisis-stricken southern European nations took another blow.

hg/pfd (dpa, Reuters, AFP)