This month's Zew survey continues a trend that has been in play for several months. Sentiment remains quite low and this month it is moving lower. The current situation has slipped for the second month in a row. And in those two months, the value of the positive current reading has been more than halved from +44.1 to +21.1.

The current reading is still relatively firm, standing higher only 25% of the time. One year ago it was at a reading of 90.6 and was higher only 0.9% of the time. Despite some continuing strength, the slippage is clear.

The expectations index is lower this month; its level is higher 88% of the time, thus its current level already is low. It is at about the sale position it was one year ago although it had improved it has slipped again. Two months ago expectations were at a value of 10.8 it is now at -19.6. The view that Germany could rise while the rest of the Zone floundered is now a thing of the past.

Very clearly the ‘weak e-Zone’ is pulling down the strong ‘e-Zone’ and it is not working the other way around. Indeed, Germany itself is keeping austerity pressures full bore on the weaker nations in need of adjustment and policy changes. This has adverse implications for the creditworthiness of the strong Zone members their government units as well as their top economic transactors.

Germany’s reluctance to help more as well as to be more flexible is keeping the e-Zone weak and making it weaker-still. In turn, that is also making Germany weaker as it is also a part of the Zone. The lack of any consensus to actually boost the e-Zone remains a clear risk to growth up and down the line from weak to strong. As in the US the central bank has probably already done more than it should even though there are still calls for it to do amore.

While some recent data have showed some stronger data for Germany and even for industrial output in the Zone these would appear to be unsustainable country and as well as Zone-wide moves.

Europe is weakening and the weakness is spreading and so are the risks and the Fed Chairman has reminded us of that today as well as of the heightened uncertainty.