“German business confidence unexpectedly fell from a 10-month high in March as Cyprus inflamed the euro region’s debt crisis.
The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, declined to 106.7 from 107.4 in February. That’s the first drop in five months. Economists predicted a gain to 107.8, according to the median of 42 forecasts in a Bloomberg News survey. In France, industrial confidence was unchanged this month.
With the European Central Bank threatening to cut off emergency funding for Cyprus’s banks unless it agrees to the terms of a European Union-led bailout, the tiny Mediterranean island has re-ignited concerns about the euro and roiled financial markets. Still, German investor sentiment unexpectedly rose to a three-year high this month and the Bundesbank said the nation’s economic recovery remains on track.
“While the decline in confidence is certainly a damper after the recent surge in optimism, the scenario of a moderate recovery gradually picking up speed in the course of the year hasn’t changed,” said Heinrich Bayer, an economist at Deutsche Postbank AG in Bonn. Uncertainty around Cyprus may weigh on the outlook for companies, “but it probably won’t have any real consequences for the German economy,” he said.
