German economic sentiment deteriorated significantly more-than-expected in May, declining for the first time in six months according to the ZEW survey.
The monthly index of investor and analyst expectations fell to 10.8 from 23.4 in April. The current situation index increased to 44.1 from the previous 39.0. On the index, a level above 0.0 indicates optimism, whereas a level below 0.0 indicates pessimism.
In contrast, the euro zone economic sentiment index turned negative for the first time in three months in May, dropping by 15.5 points to minus 2.4 from April’s reading of 13.1 in April. The forecast was for economic sentiment to ease down by less, just 1.4 points to 11.7.
The indicator for the current economic situation in the euro zone has decreased by 11.2 points and now stands at minus 60.2 points.
Commenting on the report, ZEW President Wolfgang Franz said, “Against the backdrop of the sovereign debt crisis in the euro zone, economic risks have risen during the previous weeks according to the financial market experts.”
Recent concerns over the uncertain Greek political situation and the inability of Greek leaders to form a stable government has rattled markets and weighed on the euro. Talks of a possible Greek exit from the euro would cause European governments to lose huge sums of money lent to Greece, and would likely throw the entire region into economic turmoil.
The euro did not react much to the data, and maintained the bounce from earlier4-month lows to rise against the dollar in the European session. Helping the recovery in the euro was the earlier German GDP data which showed Germany grew five times more than expected in the first quarter of 2012.