Business News

Europe's economic mood continues to brighten

Jan 6, 2011, 11:30 GMT

Berlin - The economic mood in Europe ended last year on a high note, despite the threat posed by the region's debt crisis, a key indicator released Thursday showed.

The European Commission's closely watched business and consumer survey for the members of the euro currency bloc rose from 105.2 in November to a more-than-forecast 106.2 last month. The consensus among economists was that the index would nudge up to 105.5.

This suggests that, for now at least, 'the improving global economic outlook is offsetting the ongoing troubles in the periphery,' said Ben May, European economist with the research group Capital Economics.

But the survey also underlined the widening gap in the economic performance of what is now the 17-member eurozone.

While the mood in Germany, the currency bloc's biggest economy, continued to brighten, sentiment in the eurozone's heavily indebted geographical periphery darkened again.

This included both Spain and Greece, which have been struggling to overcome high deficit-and-debt levels. The survey showed economic sentiment in both nations fell again in December.

Greece along with Ireland has already been forced to take a European Union-led bailout to help them emerge from the financial crisis, which emerged last year.

The concern among European officials is that the crisis could spread this year, engulfing Portugal and even Spain.

Despite this, the commission's survey showed sentiment in Portugal gaining ground in December. However, it remains below its long-term average.

The economic uncertainty surrounding nations such as Spain and Portugal means that the European Central Bank (ECB) will not be in any rush to raise its benchmark interest rate from its current historic low of 1 per cent.

'The ECB will take the crisis nations into consideration when making its monetary policy decisions and will not be increasing its key rate in 2011,' said Commerzbank economist Christoph Weil.

The eurozone's membership was expanded to 17 this month after the small Baltic state of Estonia joined the currency bloc on New Year's Day.