German investor confidence drops to 3-year low

German investor confidence fell to the lowest in almost three years in October as Europe 's debt crisis threatened to infect banks and curb economic growth, Bloomberg reports.

The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict developments six months in advance, declined to minus 48.3 from minus 43.3 in September. That's the lowest since November 2008. Economists expected a drop to minus 45, according to the median of 39 estimates in a Bloomberg News survey.

Stocks and the euro erased gains yesterday after the German government said European leaders won't deliver a complete solution to the region's debt crisis at an Oct. 23 summit. While Germany 's Bundesbank yesterday predicted "strong" growth in the third quarter thanks to a rebound in industrial production and private consumption, it said the outlook has deteriorated.

The ZEW reading "is consistent with a recession in Germany and the euro zone in the fourth quarter and the first quarter of next year," said Christian Schulz , an economist at Joh Berenberg Gossler & Co. in London. "Unless a solution to the crisis is found, confidence is unlikely to return quickly and the recession may become deeper and more protracted."

ZEW's gauge of current conditions fell to 38.4 from 43.6. The euro extended its decline after the report and traded at $1.3679 at 11:50 a.m. in Frankfurt .

While Germany's benchmark DAX share index has dropped 20 percent since the end of July, it has gained in the past two weeks. SAP AG, the world's largest maker of business-management software, on Oct. 14 reported third-quarter earnings that beat analysts' estimates.

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