A group of leading think tanks in Germany have cut growth forecasts for the country and warned of recession.
The economic institutes said Europe’s biggest economy would only grow 1% next year instead of the 2% they had been expecting six months ago.
But this assumes that the crisis in the eurozone does not worsen.
They also criticised the European Central Bank’s latest initiative to ward off the crisis, saying its debt purchases risked fuelling inflation.
Last month the ECB unveiled plans to buy up the government debts of struggling eurozone members, but only if those governments first signed up to a rescue package, including strict conditions on cutting their overspending and reforming their economies.
“This process could be triggered by the ECB effectively providing monetary financing for states,” according to the semi-annual report by the four think tanks, Ifo in Munich, IFW in Kiel, IWH in Halle and RWI in Essen.
“Europe’s citizens and players in the markets may lose trust in the ECB’s ability to ensure long-term price stability as a result.
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