Weaker Germany Exposes Further European Decline

July 8, 2014 Share Print 0

An economic slowdown in Germany could bode ill for its easterly neigbors, whose open economies make them vulnerable to weakness in their biggest export market.

Official figures published Monday showed German industrial production fell by 1.8 percent in May from April—sharply worse than the flat reading anticipated. Moreover, revision to the figure for April showed production also fell during that month, by 0.3 percent.

The data came in the wake of surveys suggesting weakening business sentiment in Germany, and indicate a slowdown that could hit those emerging European economies which have it as their biggest trading partner. These include the former Soviet satellite states of Poland, Hungary, the Czech Republic and Slovakia, as well as Slovenia and Turkey.

Speaking in the capital of Slovakia, Bratislava, one asset manager said the country was too dependent on Germany’s fortunes.

“It is over-reliant,” Tomas Martinec, the director of boutique asset management firm Metatron Capital, told CNBC. “I think the government understands, and the question is whether it has got the long-term strategy to change this.”

Comments from Slovakia’s official trade agency, meanwhile, suggested the government was aware of this issue.

“We certainly need to focus on fast-growing parts of the world,” the head of the Slovak Investment and Trade Development Agency (SARIO), Robert Simoncic, told CNBC in Bratislava. “Our economy is very much connected to the German economy; there is no secret about that.”

via CNBC

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.