Investor confidence in Germany held steady in December despite uncertainty over Italy’s troubled banks and upcoming elections in Europe, a leading survey said Tuesday.
The headline index calculated by the ZEW economic institute stood at 13.8 points, the same value it reached after a sharp jump in November.
Analysts surveyed by Factset had predicted sentiment would climb slightly higher to 14.1 points.
“The overall assessment is quite positive,” ZEW President Achim Wambach said in a statement.
“The considerable economic risks arising from the tense situation in the Italian banking sector, as well as the political risks surrounding upcoming elections in Europe, seem to have faded into the background at the moment,” he said.
Markets are nervously watching the developments in Italy, where political upheaval has added to concerns about the country’s ailing banks, which are saddled with bad loans.
The Monte dei Paschi di Siena bank (BMPS) in particular urgently needs to raise cash to avoid a state-subsidized rescue, and there are fears that any shocks to the Italian banking sector could spread to the wider eurozone.
Following the voter upsets caused by Brexit and the surprise victory of Donald Trump in the United States, investors are also bracing for elections next year in key eurozone economies France, Germany, the Netherlands and possibly Italy.
For the survey, ZEW questions analysts and institutional investors about their current assessment of the economic situation in Germany, as well as their expectations for the coming months.
The sub-index measuring financial market players’ view of the current economic situation in Germany increased by 4.7 points to 63.5 points in December, ZEW said.
“On balance, this survey and others suggest that the German economy is faring well for now,” said analyst Jennifer McKeown of Capital Economics.
“But we doubt that recent strong rates of growth, which have owed much to the effects of falling inflation on consumer spending, will be sustained,” she said.
She predicted Germany would see a slowdown in 2017 that “could be much sharper if political risks... materialize.”
The Bundesbank, Germany’s central bank, last week lifted its growth forecasts for Europe’s largest economy, underpinned by strong domestic demand and high wages. The economy should expand by 1.8 percent in both 2016 and 2017, the bank’s forecasters said.
The German government for its part expects the economy to grow by 1.8 percent this year and 1.4 percent in 2017.

Source: Arab News