Euro's record rise to $1.333 per euro on Friday caused a serious drop in German business sentiment. The continued euro surge confirmed speculations that the European Central Bank can be expected to lower interest rates in an attempt to save the fragile economic recovery.

 

Ifo economic institute reports a drop in German business climate index to 94.1 in November as compared to 95.3 last month. Ifo believes that the reasons behind the drop are surging oil prices and euro rise undermining export-led recovery.

 

ABN Amro analyst Dario Perkins said that Germany "desperately needs a recovery in domestic demand to prevent the economy falling back into recession".

 

Despite analysts’ forecasts, the German authorities remain optimistic. Economics and Labor Minister Wolfgang Clement said in a speech Thursday that "stagnation is over - things are looking up and will continue to look up."