Eurozone Recovery On Track As German Confidence Tops Five-Year High

The long-awaited recovery of the eurozone economy finally appears to be materializing, with German business confidence currently at a five-and-a-half year high and sentiment also buoyant elsewhere in the single currency area, data showed on Jan. 25. In Germany, the euro-area's biggest economy, things got off to a flying start this year, with business confidence in January rising to its highest level since May 2000 and the government penciling in growth of much as 2.0% for 2006.

Ifo's widely watched business climate index surged an unexpectedly strong 2.3 points to 102 points this month in what was the fifth consecutive monthly rise.

"From gloom to boom in less than a year. German business leaders, who were still ridden by 'angst' last spring, now seem to be almost dancing in the streets," said Bank of America economist Holger Schmieding. Germany finally appears to be reaping the fruits of wage restraint and painful structural reforms, he said.

Business leaders' optimism is certainly shared by the government. In Berlin, Economy Minister Michael Glos upgraded Berlin's growth forecast for the current year to 1.4%. And Glos even boldly claimed that growth could even come out as high as 2.0%, double the 0.9% recorded last year.

"Companies are a lot more satisfied with current business than they were in December. And they're a great deal more confident about the outlook for the next six months," Ifo said.

Copyright Agence France-Presse, 2006

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