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ECONOMY

Investor sentiment rises to three-year high

Investor sentiment in Germany has risen to levels last seen before the start of the three-year-old debt crisis, adding to signs that Europe's top economy is over the worst, a poll found on Tuesday.

Investor sentiment rises to three-year high
Photo: DPA

The widely watched investor confidence index calculated by the ZEW economic institute soared to 48.2 points in February from 31.5 points in January. It is the third consecutive monthly rise and brings the index to its highest level since April 2010.

Analysts had been expecting a much more modest increase to just 35 points this month. “As the latest gross domestic product (GDP) data show, the German economy cooled noticeably at the end of last year.

But the rise in investors’ economic expectations in February suggests that financial market experts are projecting an improvement in the coming months,” said ZEW President Wolfgang Franz.

“Experts have ticked off the weak fourth quarter of 2012. In their view, the headwinds for the German economy coming from the eurozone crisis are not as strong as they were a few months ago. If this remains the case in the coming months, the German economy will gain modest momentum again,” Franz said.

After GDP growth in Germany slowed throughout 2012, the economy actually contracted by 0.6 percent in the last three months as weak demand in other eurozone countries hurt exports.

Nevertheless, the government, the Bundesbank and other economic experts are convinced that the dip in growth will prove only short-lived and the economy will start growing again in the first quarter of 2013.

That means Germany will have avoided the recession that has entrenched most of its eurozone partners and the single currency area as a whole.

For the survey, ZEW questioned analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.

The sub-index measuring financial market players’ view of the current economic situation in Germany slipped by 1.9 points to 5.2 points in February, its lowest level since June 2010.

A frequent criticism against the ZEW index is that it can be volatile and is therefore not particularly reliable. Analysts nevertheless took cheer from the numbers, even if they said they would wait to see whether other sentiment indicators and even hard economic data backed up investor optimism.

The key Ifo business climate index is scheduled to be published later this week. “All in all, financial investors are increasingly bullish about the outlook for Germany’s economy and seem to expect a recovery with accelerating pace ahead,” said Barclays Research analyst Thomas Harjes.

Commerzbank economist Ralph Solveen agreed. “A growing percentage of analysts obviously assumes that the German economy has managed to turn around and that an upturn is imminent,” he said.

“However, indications as to whether or not they are right will only be provided by the purchasing managers’ indices and Ifo business climate, due out on Thursday and Friday, respectively. But these indices are also expected to continue rising.”

Natixis economist Johannes Gareis said the two main reasons for the increase in the ZEW index were the easing of the eurozone crisis and the low level of interest rates. “However, the economic situation of Germany’s trade partners is for the most part still quite weak, as the fourth-quarter GDP data indicated, and this led to the decrease in the current situation sub-component.

“Despite the upbeat reading, we remain cautious with regards to Germany’s prospects, as there are many challenges to overcome in 2013. Nonetheless, we still expect positive growth out of Germany, albeit at a slower pace than 2012,” Gareis said.

Berenberg Bank economist Christian Schulz said said the PMIs and the Ifo index due out at the end of this week will be more important in assessing the extent of the upswing. “We expect further improvements there after the strong gains in recent months,” he said.

Capital Economics economist Jennifer McKeown argued that the improvement was partly due to hints of further action on the part of the European Central Bank. But with the ECB’s words “yet to be followed up with actions and political risks in Italy growing, we fear that investor sentiment might weaken again before long,” she warned.

AFP/mb

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MONEY

Italy expands €200 payment scheme and introduces public transport bonus

Italy's government will extend its proposed one-time €200 benefit to more people and introduce a €60 public transport payment, Italian media reported on Thursday.

Italy expands €200 payment scheme and introduces public transport bonus

Seasonal workers, domestic and cleaning staff, the self-employed, the unemployed and those on Italy’s ‘citizens’ income’ will be added to the categories of people in Italy eligible for a one-off €200 payment, ministers reportedly announced on Thursday evening.

The one-time bonus, announced earlier this week as part of a package of financial measures designed to offset the rising cost of living, was initially set to be for pensioners and workers on an income of less than €35,000 only.

However the government has now agreed to extend the payment to the additional groups following pressure from Italy’s labour, families, and regional affairs ministers and representatives of the Five Star Movement, according to news agency Ansa.

Pensioners and employees will reportedly receive the €200 benefit between June and July via a direct payment into their pension slip or pay packet.

For other groups, a special fund will be created at the Labour Ministry and the procedures for claiming and distributing payments detailed in an incoming decree, according to the Corriere della Sera news daily.

One new measure introduced at the cabinet meeting on Thursday is the introduction of a one-time €60 public transport bonus for students and workers earning below €35,000. The bonus is reportedly designed to encourage greater use of public transport and will take the form of an e-voucher that can be used when purchasing a bus, train or metro season pass.

Other provisions reportedly proposed in the energy and investment decree (decreto energia e investimenti), which is still being adjusted and amended, include extending energy bill discounts, cutting petrol excise duty and rolling on the deadline to claim Italy’s popular ‘superbonus 110’.

The €14 billion aid package, intended to lessen the economic impact of the war in Ukraine, will “fight the higher cost of living” and is “a temporary situation”, Prime Minister Mario Draghi has said.

The Local will report further details of the payment scheme once they become available following final approval of the decree.

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