The latest storms in Europe's sovereign debt crisis and stock-market chaos have triggered the deepest collapse in economic confidence in the eurozone since 2008's financial meltdown, gloomy new figures revealed today.
The European Commission's latest snapshot of sentiment across the 17 euro countries revealed plunging confidence among businesses of all types and adds to the welter of dire economic news from the region in recent days.
The closely watched monthly survey showed sentiment falling at the fastest pace since December 2008 in the wake of the Lehman Brothers collapse and will fuel fears of a double-dip recession.
It comes after a month of turbulence which saw the US stripped of its gold-plated AAA credit rating and speculative attacks on Spain and Italy, which forced the European Central Bank to intervene to buy up the bonds of the debt-laden nations.
The eurozone managed growth of just 0.2 percent in the second quarter of 2011 as powerhouse economies like France and Germany stagnated. The commission expects growth to slow down further due to high oil prices in the first half of the year and the recent turmoil in markets. Commerzbank economist Christoph Weil said: "Concerns about euro-area fiscal deficits and the global slowdown are aggravating economic confidence."
The commission's survey is seen as a robust indicator of future activity, but the indicator fell to 98.3 in August from a revised 103 in July with optimism declining in all sectors.
Financial information firm Markit added to Europe's worries after its latest survey found the region's crisis closing consumer wallets. Sales fell for the fourth month in a row as retailers "continued to endure challenging conditions", Markit said.
The euro dropped more than a cent against the dollar and also fell against the pound as markets reacted to the poor data. The worries over confidence and growth will increase the pressure on ECB president Jean-Claude Trichet to reverse its previous hard line on inflation after two interest rate hikes earlier this year.
Bank of England Governor Sir Mervyn King has also flagged up the eurozone's woes as the biggest risk to the UK's fragile recovery, as the region accounts for almost half of the nation's exports. The latest business barometer from Lloyds Bank Corporate Markets showed confidence among UK firms slumping at the fastest rate since March 2009.