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Eurozone – Economic climate rises further

10 February 2011

The latest indicator for the economic climate in the Euro area published by market research institute IFO in collaboration with the International Chamber of Commerce has risen clearly in the first quarter of 2011, surpassing its long-term average for the first time since the end of 2007. Especially the current economic situation, but also the expectations for the coming six months have been assessed more favourably than in the fourth quarter of 2010. These results indicate that the economic upswing will continue in the coming half year for the euro area on the whole, with however considerable differences among the individual member states.

The current economic situation is assessed as very favourable in Germany and Austria. In Belgium, Slovakia, Finland, the Netherlands and Luxembourg the situation is satisfactory. The economic situation in France, Italy and Estonia improved somewhat in comparison to the previous quarter but still remains unfavourable, in the opinion of the World Economic Survey (WES) experts. In the peripheral euro countries of Greece, Ireland, Spain and Portugal, the economic experts continue to assess the current economic situation as very weak.

The expectations for the coming six months in the euro area are confident on the whole. Only in Greece and Portugal do the experts foresee a further worsening of the economic situation.

The price expectations of the WES experts speak for an increase in inflation in the coming months. For the year, an inflation rate of 1.9% is expected for the euro area, which lies close to the stability goal of the European Central Bank (ECB).

More of the WES experts anticipate that the ECB will increase its rates in the course of the coming six months. In their opinion, the long-term interest rates will increase more strongly than short-term rates.

The euro is seen as somewhat overvalued in relation to the US dollar. In the course of the coming six months, the experts foresee a slight appreciation of the dollar vis-à-vis the Euro.

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