The German economy, the motor of eurozone growth, is grinding to a halt, according to a series of forecasts from leading economic institutions.
Growth will slump to just 0.8 per cent this year and rise to only 1 per cent in 2013, as problems elsewhere in the eurozone continue to hit German exporters, the institutions predict.
This is a substantial downgrading from the previous forecasts, issued in the spring, which suggested 0.9 per cent growth for 2012 and 2 per cent for 2013. However, the four leading German economic research institutes – the Institute for Global Economic Research, the Ifo Institute, the Rhine- Westphalia Institute and the Institute for Economic Research – all said they expected the eurozone to resolve its current sovereign debt crisis in 2013, paving the way for a return to growth.
But such are the continuing concerns that the eurozone could implode that a senior IMF official at the fund's summit in Japan has said he would "welcome" Spain requesting that the European Central Bank buy its bonds.
The IMF head of monetary and capital markets, Jose Vinals, said: "It's up to the government and we would welcome any decision to take it [an ECB bailout]. If not, we understand they must have their reasons."
Meanwhile, unions in Greece have called a strike next week against the government's attempt to find a further €13.5bn (£10.9bn) in cuts, to coincide with the European leaders' summit in Brussels on 18 October. Ilias Iliopoulos, the general secretary of the Greek public sector union ADEDY, said: "We want the government to withdraw these horrible measures, which have brought us such misery."Reuse content