ECB changes tune on rate hikes
German economy hit by toxic mix of shocks
Markets dubious about more hikes, see risk of cuts

FRANKFURT, Aug 10 Reuters The European Central Bank is on the back foot again and this time the bad news doesn39;t come from Greece, Italy or any of the usual suspects in the bloc39;s poorer south.

The club39;s biggest member and supposed powerhouse, Germany, has been hit by a toxic mix of weak trading with key partner China, a slump in its large manufacturing and construction sectors and even some existential questions about a business model predicated on cheap fuel from Russia.

Trouble in Germany is hobbling growth in the euro zone as a whole and threatening to push it into a recession, rather than the soft landing of moderate growth and inflation that the ECB had pencilled in and the United States is still hopeful of achieving.

This is forcing a change of tune at the ECB from ruling out a pause in its steepest and longest streak of interest rate hikes to openly talking about one as soon as next month.

And the market thinks the central bank may even have to undo some of those increases sooner rather than later, just like it did at the time of its last tightening cycle in 2011 when debt crises in Greece, Portugal, Ireland, Spain and Cyprus were accompanied by a broader recession. .

There are some similarities between the 2011 circumstances and now, Richard Portes, a professor of economics at the London Business School, said. There was a…