The Bundesbank said geopolitical tensions may impede a rebound of the German economy, Europe's largest, after it contracted in the second quarter.
"The economic outlook for the German economy has clouded over in the middle of the year in response to unfavorable international news," the Frankfurt-based central bank said in its monthly report published today. "Expectations for a strengthening of economic momentum in the second half of 2014 underlying the spring projections are called into question by current data."
Today's report is the strongest warning yet from the Bundesbank, which said in the past that economic weakness in the second quarter will be temporary, and it signals that forecasts published only two months ago may be too optimistic. Pared with a lack of growth in France and Italy in the period, German prospects threaten to weigh on a euro-area recovery that the European Central Bank (ECB) is trying to sustain with unprecedented stimulus.
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