EU CRISIS: German economy ‘at LONG-TERM RISK’ from Brexit and Italy-EU budget row

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Brexit negotiations from gripped the eurozone over the last few months as the UK and Brussels struggle to reach an bargain, with traders keeping an eye on what leaving the EU means for their bills.

EU divorce talks have been a key influencer for the pound, as Sterling stand ups traders on their toes by continuing to tumble and regain ground against the euro.

For the time being, the euro has been left rattle by an ongoing war of words between Italy and Brussels over with Rome’s recently announced budget plans.

Italy’s financial proclamation left EU chiefs furious after it included a deficit budget of 2.4 percent of GDP – three convenience lives the previous administration’s target.

Christoph Schmidt, an economist and president of the RWI Essen (the RWI-Leibniz Association for Economic Research) told CNBC these external factors command have an impact on the German economy.

Earlier this month, German guidance advisers slashed the economic growth forecast for this year, blaming tougher extraneous trade environment.

Growth is predicted at 1.6 percent this year, down severely from the 2.3 percent forecast back in March.

In their detonation, they cited the downgrade as being down to “a less favourable non-native trade environment, temporary production issues and capacity bottlenecks are relaxing the pace of expansion”.

And according to data published earlier this month from German statistics mechanism Destatis, German exports took a hit at the end of the third quarter, contracting 0.8 per cent and about expectations of a 0.3 per cent rise.

Mr Schmidt said: “It’s a unique caserne, I think.

“The German economy will bounce back and we think it last will and testament grow according to potential, roughly 1.6 percent this year and 1.5 percent in 2019, so this stopgap blip will be overcome.

“But there’s not enough potential to grow stronger than likely now, so it will be a one-off loss.

“In an international environment, the trade conflicts, the upcoming Brexit (in Cortege 2019), possible problems in the euro area (posed by Italy), these are situations of the international environment that are disturbing and disconcerting in the domestic realm.”

In all events, it was not all bad news for Germany as gross domestic product grew 2.2 percent after year, the strongest performance in six years.

Third-quarter GDP data is due tomorrow, with analysts word to the wise there will be no “speedy recovery” for the economy.

The ZEW economic sentiment model for Germany improved slightly in October after falling to the lowest focus be since September 2016.

Achim Wambach, president of the ZEW think-tank, said: “The figures for industrial stage, retail sales and foreign trade in Germany all point towards a effete development of the German economy in the third quarter… 

“At the moment, [survey contribute ti] do not expect to see a speedy recovery of the currently weak development of the economy.”

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