Morale among German analysts and investors plummeted in October as the diesel emissions scandal at carmaker Volkswagen and weakness in emerging markets took their toll. As David Pollard reports the survey by ZEW think tank showed economic sentiment falling to 1.9 points in October from 12.1 in September.
It's tough at the top, especially when you don't know what's going on down below. Paul Willis is VW's UK chief. (SOUNDBITE) (English) VOLKSWAGEN UK MANAGING DIRECTOR, PAUL WILLIS, SAYING: "I find it absolutely implausible that senior people of the company would have known of these issues with regard to the testing regime." Willis was appearing before the UK parliament - the latest VW chief to face grilling for a scandal that's cost VW a third of its share price. And what is becoming known, slowly, is the impact on sentiment. VW and sluggish emerging market growth to blame, says Germany's ZEW, for a much sharper than expected drop from September. Commerzbank economist Peter Dixon. (SOUNDBITE) (English) GLOBAL FINANCIAL ECONOMIST, COMMERZBANK, PETER DIXON, SAYING: "The risks are tilted to the downside, what with international uncertainty, problems in the emerging markets, and I guess a lot of questions about what happens with regard to monetary policy on the other side of the Atlantic." That's a worry echoed across the German engineering sector, according to its trade association. The VDMA lists powerhouse corporates like Siemens among its members. Today, it said uncertainty and weakening markets would mean 'stagnation' next year. And, adding to a gloomy tally of recent data and downgrades, the German government is to trim its growth estimate from 1.8 to 1.7 per cent this year. That's according to a government official, who says the economy ministry will announce the new forecasts on Wednesday.