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Investor sentiment in Germany surged to the highest level for three years in February, as the financial markets believe Europe's top economy has put the worst of the crisis behind it, a poll found on Tuesday.
The widely watched investor confidence index calculated by the ZEW economic institute soared to 48.2 points in February from 31.5 points in January. That is its highest level since April 2010.
Analysts had been expecting a much more modest increase to just 35 points this month.
"As the latest gross domestic product (GDP) data show, the German economy cooled noticeably at the end of last year. But the rise in investors' economic expectations in February suggest that financial market experts are projecting an improvement in the coming months," said ZEW President Wolfgang Franz
"Experts have ticked off the weak fourth quarter of 2012. In their view, the headwinds for the German economy coming from the eurozone crisis are not as strong as they were a few months ago. If this remains the case in the coming months, the German economy will gain modest momentum again," Franz said.
After GDP growth in Germany slowed throughout 2012, the economy actually contracted by 0.6 percent in the last three months as weak demand in other eurozone countries hurt exports.
Nevertheless, the government, the Bundesbank and other economic experts are convinced the dip in growth will prove only short-lived and the economy will start growing again in the first quarter of 2013.
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 slipped by 1.9 points to 5.2 points in February.
A frequent criticism against the ZEW index is that it can be volatile and is therefore not particularly reliable.