German investor confidence has fallen sharply in May, as financial experts see euro zone public debt as a major risk for German business, the ZEW economic research institute said today.
The closely watched financial sector indicator lost 7.2 points to 45.8 points, well below an average analyst forecast for a more modest drop to 47 points.
'Financial market experts consider the increasingly apparent problems of numerous countries with respect to their public debt as a major risk for German business activity,' a ZEW statement said.
Efforts by euro zone governments to tackle their massive debts could also hamper economic growth, while the euro's rapid fall in value against other major currencies probably affected investor sentiment as well, it added.
'The decline of the sentiment indicator may reflect the rising uncertainty of consumers and investors with regard to the measures aiming at consolidating the public budgets in the euro zone,' ZEW president Wolfgang Franz said.
'Another reason for the indicator's decline may be the uncertainty with regard to the further development of the euro exchange rate,' he added.
But despite the 'dampened expectations', the 275 analysts and institutional investors polled by ZEW still thought German business activity would continue to recover over the coming six months.
