German optimism index rises on growth

A KEY index of optimism about the German economy has risen more than expected, underlining modestly improved prospects for Europe's recovery.

The ZEW index rose to 54.6 points from 52.8 points in October.

That is more than the 54.0 expected on average by analysts, and well above the index's long-term average of 24.1.

Clemens Fuest, who heads the ZEW or Centre for European Economic Research, said on Tuesday that "the slightly improved economic growth in the eurozone likely contributed to this".

The overall economy of the 17 countries that use the euro currency has shown modest growth for two quarters in a row after a long period of declining output.

However, growth remained weak in the third quarter at only 0.1 per cent.

The European Central Bank cut interest rates on November 7 to try to strengthen the weak recovery.

Capital Economics chief European economist Jonathan Loynes said the survey "provided some evidence that the eurozone's biggest economy has continued to expand in the fourth quarter, but at a relatively moderate pace".

Germany's economy, Europe's largest, slowed to quarterly growth of 0.3 per cent in the third quarter from 0.7 per cent in the previous three-month period..

Loynes said the data suggested the German and eurozone recoveries were not strong enough to help indebted countries in southern Europe such as Greece, Portugal, Italy, Cyprus and Spain.

Those countries have cut back on spending and raised taxes to improve government finances.

But that has hurt growth and sent unemployment higher.

"The overall message appears to be that, while the German, and the eurozone, economies continue to grow, they do not appear to be accelerating to the sort of pace which might start to have a beneficial impact on the beleaguered peripheral countries," Loynes said.

The index was based on a survey of 265 professional investment analysts November 4-18.

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