GERMAN BUSINESS sentiment rose to its highest level in 17 months in December and parliament passed a tax-relief package that will add support to a recovery in Europe’s largest economy next year.
The Munich-based Ifo think tank said yesterday its business climate index, based on a monthly survey of some 7,000 firms, rose to 94.7 from 93.9 in November.
In further positive news for Germany’s growth outlook, the upper house of parliament approved the first tax-relief package by chancellor Angela Merkel’s new coalition, sparing her an embarrassing setback early in her second term.
“The global business cycle is turning up, as we see with Ifo today, so Germany is heading for a good performance anyway, but the fiscal package adds to the good performance,” said Holger Schmieding, economist at Bank of America Merrill Lynch.
Mr Schmieding said the tax-relief measures and additional stimulus spending due to kick in next year would be worth about 1.5 per cent of gross domestic product in 2010. “That is significant . . . we are looking for 2.5 per cent growth next year,” he added.
Ifo economist Klaus Abberger said the European Central Bank (ECB) was unlikely to raise rates before the second half of 2010.
“The ECB is not under pressure to shift gears on rates in the foreseeable future,” said Ulrich Wortberg at Helaba.
Germany pulled out of its deepest postwar recession in the second quarter, when the economy grew by 0.4 per cent. – (Reuters)
