German Business Confidence Grows for Second Straight Month in December

on Dec 19, 2012
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Positive news came out from the Eurozone this week with Standard & Poor’s raising Greece’s credit rating and German business confidence climbing for a second consecutive month.

**Greece’s Credit Rating**
Yesterday S&P made the most dramatic reassessment of the situation in Greece since the country began its downward slide three years ago. The international credit rating agency raised Greece’s grade from selective default to B- with a stable outlook citing the “strong determination” of Eurozone officials to keep the nation in the currency bloc. According to news agency Bloomberg the new grade is the highest Greece has had at S&P since June 2011, when it was cut from B to triple-C.

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“The stable outlook balances our view of euro zone member states’ determination to support Greece’s euro zone membership and the Greek government’s commitment to a fiscal and structural adjustment against the economic and political challenges of doing so,” the ratings company said.
Last week Greece started to receive the latest batch of bailout funds from the European Union and the International Monetary Fund. On Tuesday the Eurogroup released €34.3 billion (£27.8 billion) out of which €16 billion (£13 billion) will go towards increasing Greek banks’ regulatory capital. So far the crisis-struck country has received almost €149 billion (£121 billion) from the EU and the IMF out of the agreed upon €240 million (£195 million).

S&P pointed out that Greece’s net debt-to-GDP ratio, still above 160 percent, is distressing but if the country stayed on track with reforms, Eurozone member states would help improve the lending terms “significantly”.
**German Business Confidence Grows**
The Business Climate Index measured by the Ifo institute climbed from a reading of 101.4 in November to 102.4 this month marking the second straight increase after a drop to a two-and-a-half year low in October.

!m[](/uploads/story/1067/thumbs/pic1_inline.png)News agency Bloomberg reported that exports and factory orders rose in the past months and shipments to countries outside Europe helped offset ailing demand from the Eurozone. The Bundesbank said this week the German economy will swing back to growth next year after contracting in the fourth quarter. “There’s a good chance we will see a recovery some time next year,” said Alexander Koch, an economist at UniCredit Research, as quoted by Bloomberg. “At the same time, downside risks remain for the German economy, coming mainly from its euro-area partners.”

The roughly 7,000 German companies participating in the Ifo institute survey appeared optimistic about the coming six-months but said that the current business environment has deteriorated from November. The Ifo sub-index designed to assess current conditions fell to 107.1 this month from November’s print of 108.1.
European markets welcomed the news today with the FTSEurofirst 300 climbing 0.4 percent to 1,141.80 points – a fresh intraday high. German 10-year securities saw their yields go up by one basis point to 1.42 percent at 9.15 GMT after rising to 1.44 percent –the most since 3 December.

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