German Economic Confidence Signal Rare Bright Light

Investors finding solace in international efforts to help financial situation

Germany's closely watched ZEW economic indicator picked up on Nov. 11, with investor confidence improving slightly on the back of international efforts to get to grips with the financial crisis. But two days before the government was expected to confirm that the world's top exporter is in recession, experts warned that the country's prospects were still far from bright. Five leading economic institutes -- known as the "Wise Men" -- are expected to show on Nov. 12 that the economy will register no growth at all in 2009.

The ZEW economic research institute said its investor sentiment index had risen to minus 53.5 points this month from minus 63.0 points in October, compared with a record low of minus 63.9 in July. The result was better than expected.

"The earlier pessimistic expectations of the financial market experts are confirmed by the current economic development in Germany. The experts, however, seem hopeful that the collective actions of governments and central banks will mitigate the economic slowdown," a statement quoted ZEW president Wolfgang Franz as saying.

Berlin recently cut its forecast for economic growth in Germany to a mere 0.2% in 2009 as the crisis takes its toll on economies around the world.

Since financial markets were plunged into turmoil following the collapse of U.S. investment bank Lehman Brothers, central banks around the world have sharply reduced interest rates in a bid to stimulate economic activity. Major central banks including the U.S. Federal Reserve, the European Central Bank (ECB) and the Bank of England (BoE) cut rates simultaneously by 0.5% in a co-ordinated move on October 8. The ECB cut rates by a further 0.5% to 3.25% on Nov. 6, while on the same day, the BOE slashed its rate to 3%. Meanwhile, governments around the world including Germany have approved multi-billion dollar (euro) packages aimed at rescuing troubled banks and boosting economic activity.

Leaders of the G20, which includes the seven leading economies and key developing ones, will meet on Nov. 15 in Washington to discuss the way forward to ensure that the worst financial crisis since the Great Depression is not repeated.

Copyright Agence France-Presse, 2008

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