German investor optimism rises after 4-month drop

[September 18, 2012]  FRANKFURT, Germany (AP) -- Investor confidence in Germany's economy rose in September after falling the previous four months, according to the ZEW institute's index.

The index rose to minus 18.2 points from minus 25.5 the month before. It remains in negative territory, indicating financial markets expect Germany to lose momentum over the next six months.

ZEW institute head Wolfgang Franz said plans by the European Central Bank to intervene in bond markets and lower interest costs for indebted governments may have boosted optimism about the eurozone.

He said, however, that "the debt crisis is not solved yet, and the risks for economic activity remain."

The 17 states that use the euro face a crisis over too much debt in some countries that is weighing on economic growth.

The European Central Bank said on Aug. 2 that it could purchase government bonds issued by countries having trouble managing their debts -- such as Spain or Italy -- if they first agree to take concrete steps to heal their finances. On Sept. 6 it added to market optimism by saying that the bond purchases would be unlimited.

Such purchases would drive down the interest rates those countries pay to borrow. Rising borrowing costs have pushed Greece, Ireland and Portugal into taking bailouts from other euro member countries.

The ZEW survey of 263 investment professionals was conducted between Aug. 31 and Sept. 17.

Carsten Brzeski, an analyst from financial group ING, wrote in a blog posting that "the relative calm in the euro crisis since the beginning of August seems to have comforted financial analysts."

He noted that the calming of the crisis could ironically deprive Germany of some economic advantages. The euro has risen 8 percent against the dollar since the start of August -- a headwind for export-oriented Germany, as it makes its goods more expensive in markets outside the country. Still, he said that after three years of almost nonstop growth Germany would experience only a relatively mild slowdown.

[Associated Press]

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