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Investor confidence falters but eurozone locomotive chugs on

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Investor confidence falters but eurozone locomotive chugs on
Photo: DPA
15:30 CEST+02:00
German investor confidence has fallen, a key survey showed Tuesday, but Europe's biggest economy should chug along a little longer as EU leaders try to get the crisis-hit eurozone back on track.

A survey of financial experts by the ZEW economic research institute found sentiment has fallen to an indexed 45.8 points, the seventh decline in eight months, owing largely to the eurozone's fiscal and debt problems.

"Financial market experts consider the increasingly apparent problems of numerous countries with respect to their public debt as a major risk for German business activity," a ZEW statement said.

The index remained well above its historical average but a six-month average also fell, suggesting Germany's economic recovery could run out of steam in the second half of the year.

On the positive side, the European Union's statistics arm Eurostat said the euro's decline in value had boosted the 16-nation eurozone trade surplus to €4.5 billion ($5.5 billion) in March.

A breakdown of that data showed Germany contributed a surplus of €12.1 billion, while Ireland, Austria and Belgium posted gains of between €1.6 billion and €1.0 billion. France, Luxembourg and Slovenia were also in the black.

French and other European leaders have pressed Germany to boost domestic consumption, saying strong trade surpluses recorded by Berlin come in effect at the expense of eurozone partners, especially weaker members.

Eurozone finance ministers meeting in Brussels vowed meanwhile to fix their finances and expressed concern at the euro's rapid fall, although the single currency's present level around $1.24 is not a huge problem as it makes exports more competitive.

"While many observers currently tend to see the euro as a crisis barometer, recent surveys show that many German businesses tend to be more pragmatic," ING senior economist Carsten Brzeski noted.

The chairman of the eurozone finance group backed controversial plans for Brussels to vet budgets in all 27 EU countries before they are put to national parliaments.

Germany supports greater cohesion among eurozone economic policies and Chancellor Angela Merkel made it clear Tuesday that the bloc's locomotive did not want to haul a bunch of freeloaders behind.

"Joining the eurozone isn't about creating a union made up of financial transfers" to troubled neighbours, Merkel told the French daily Le Monde.

Commerzbank economist Simon Junker said: "Numerous countries will have to adjust their out-of-control fiscal positions and the exaggerations on their real-estate markets."

Merkel faces staunch domestic opposition to Germany's participation in an IMF-led bailout of Greece and the creation of a trillion-euro emergency debt stabilisation fund for the eurozone.

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