Eurozone business climate brightens on recovery hopes | Business| Economy and finance news from a German perspective | DW | 27.06.2013
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Business

Eurozone business climate brightens on recovery hopes

The mood among businesses in the crisis-hit eurozone has markedly improved amid signs the currency area’s recession might come to an end this year. A respective EU indicator has reached its highest level in a year.

Business confidence in the 17-nation eurozone has significantly brightened, sending the European Commission's monthly business climate index to its highest level in a year.

The mood barometer had risen by 1.8 points to 91.3 points in June, the European Union's executive arm announced Thursday. Reuters news agency said the rise was steeper than expected by economists, who had forecast a rise to just 90.3 points in a poll carried out by the news agency.

Most importantly, the sentiments of business leaders had brightened in the eurozone's five biggest economies - Germany, France, Italy, Spain and the Netherlands, the EU Commission said. In addition, the improvements were perceptible in all sectors of the economy, except construction, which was still suffering from the collapse of the real estate markets in several member states.

Between January and March, economic activity in the single currency area shrank for the sixth consecutive quarter as the bloc is experiencing its deepest recession ever. The slump forced the European Central Bank (ECB) to cut its main interest rate to the historically low level of 0.5 percent in a bid to kickstart the eurozone economy.

According to a European Union forecast, the recession is likely to play out at the end of the year with economic growth expected to return in 2014.

In related news, however, the European Central Bank (ECB) said Thursday that lending to the private sector in the eurozone fell further in May. Lending dropped 1.1 percent last month from a fall of 0.9 percent in April, the ECB said in its monthly report on eurozone monetary developments. Economists said the drop was a sign of a persistently bleak outlook on business activity in the eurozone.

“It is likely that banks believe the economic situation and outlook in many eurozone countries continue to provide a risky backdrop in which to lend,” Howard Archer, economist for HIS Global Insight, told AFP news agency. Other analysts attributed the fall in lending to less demand for credit as the recession was still enduring.

uhe/hc (AFP, Reuters)

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