German investor optimism on the rise

[October 16, 2012]  FRANKFURT, Germany (AP) -- Investor optimism in Germany rose in October, sending an upbeat signal about Europe's largest economy.

A recent easing of financial market tensions from the eurozone debt crisis helped improve the outlook among financial analysts in the closely watched ZEW survey released Tuesday.

The survey index rose more than expected to minus 11.5 points from minus 18.2 in September. Analysts had expected a reading of minus 14.9 points.

The ZEW, or the Center for European Economic Research, said that the results show "that risks for the German economy have somewhat diminished."

"This could well be explained by the decreasing uncertainty on the financial markets during the last weeks," the ZEW said.

Plans by the European Central Bank to buy government bonds issued by indebted countries on financial markets have helped ease market fears that the 17-country shared euro currency might break up. Buying government bonds has the effect of lowering painfully high borrowing costs that are weighing on the finances of indebted countries. The ECB would only buy bonds if the country agrees to take steps to cut its deficit.

Germany is important to the eurozone's fate because it is the biggest economy and its modest recent growth has kept the eurozone as a whole out of recession. Germany's government finances are in relatively good health and it grew 0.3 percent in the second quarter -- in contrast to the sharp downturns and debt problems afflicting other eurozone countries such as Spain and Italy. But Germany is going through a shaky patch because the troubled eurozone countries are major trading partners.

Economists differ over whether the economy could shrink slightly in the latter part of this year. Leading institutes expect growth of 0.8 percent for all of 2012 and 1.0 percent in 2013.

In the survey of 288 investment analysts during the first two weeks of October, "slightly more experts still expect the German economy to cool down instead of brightening up," the ZEW said.

Analyst Carsten Brzeski at ING said the result suggested any slowdown would be on the mild side and "adds to the evidence of a soft, not hard, landing of the German economy."

[Associated Press; By DAVID McHUGH]

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