German Investors And Analyst Turn Positive: Greek Debt Agreement The Reason?

German investors and analysts interviewed over the period from January 30 to February 13, 2012 by the ZEW Institute in Mannheim, Germany, became more optimistic. From an excess of pessimists of 21.5% in January there was an excess of optimists of 5.4% in February, a positive change of 27 percentage points resulting in the first excess of optimists since May 2011. The financial community also felt better about current conditions There was a rise of 11.9 percentage points in the optimists, from 28.4% in January to 40.3% in February.& The course of the financial community's opinions on current conditions and expectations over the past decade can be seen in the attached chart. Currently expectations, at 5.4%, are some 10 percentage points below the mean (15.6%) over the past ten years while the appraisal of current conditions is about 60 percentage points above its ten year average (-20.6%) suggesting that the financial community has turned from highly pessimistic appraisal of the outlook to a cautiously optimistic one.

While the positive economic data may have led to a more favorable outlook for Germany, it is probable that progress in the negotiations between the Greek Government and its creditors towards the end of the interview period played a major role in the financial community's much more optimistic outlook. To the extent that this is the case, however, it should be noted that any immanent resolution to the debt crisis may prove elusive. (It wasn't until the end of the interview period that the public reaction to the terms of the agreement--riots in the streets of Athens--was known.) Not only is the outlook, cautiously optimistic, but also fragile.

Largel Feb 12 Jan 12 Feb 11 M/M Chg Y/Y Chg 2011 2010 2009 Expectations 5.4 -21.6 15.3 27.0 -10.3 -17.2 24.5 30.0 Current Conditions 40.3 28.4 85.2 11.9 -44.9 67.2 10.3 80.5