Germany's key Ifo business climate index suffered its biggest drop for almost 28 years as September figures yesterday showed the full impact of the attacks on the United States for the first time. The index fell to 85.0 from 89.5 in August, sharply undercutting expectations and hitting its lowest level since Europe's largest economy started to re-emerge from its post-unification recession in 1993.

The plunge, which underlined the economic impact of the US attacks on the other side of the Atlantic, piled pressure on the European Central Bank for an interest rate cut at its meeting next week, economists said.

The index, based on a survey of around 7,000 German firms, is seen as a reliable leading indicator of growth in the German economy.

The survey data, which were entirely collected after the attacks, knocked the euro to its lowest level since September 11th.

But Mr Gernot Nerb, the economist in charge of Germany's leading business survey, said the sharp drop might have been an overreaction to the attacks.

The euro closed the day below the key 90 US cent mark at $0.8980.