While much of the rest of the euro area is in recession or close to it, Germany has managed to keep growing as painful labor market reforms in the early 2000s boosted productivity and restrained wage growth. With help from a weak euro, Germany has offset weak demand from the euro region with exports to emerging markets, especially China, which values German-built trains, power equipment, and machine tools. Yet the crisis is catching up with Europe’s top economy. Business confidence fell to its lowest level in more than two years in June amid speculation about Greece leaving the euro and Spain’s banking woes. The ... (full story)