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Is Germany Dragging The Rest Of Europe Down?

News that the German economy is struggling badly has cast a dark shadow over the rest of Europe with the German economy being very much a leader in the EU. A recent business report suggested that business sentiment was as low as it has been since the 1990s and looks set to get worse in the short term.

When you also consider the fact that Gross Domestic Product for German fell by 0.5% in the three month period up to June 2008 and consumer confidence is nearing a 3 year low is there any hope for the economy in the short to medium term?

Like the UK, Germany is suffering from the ECB quandary about high inflation and a need to reduce interest rates to kick start the EU economy. However, it seems that the ECB has taken the same tack as the Bank of England and is looking for signs of weakness in the EU rate of inflation before even contemplating a reduction in interest rates.

Inflation appears to be the key to the future of the European economy and until we see signs that it has peaked there is very little which the ECB can do.

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