The German IFO Institute, a private sector organisation whose name is a cognomen of its aims, which are the gathering of information regarding business sentiment and its analysis on a frequent and timely basis, with the aim of providing a leading indicator of the health of German industry and commerce, publishes its latest monthly report this morning.
Like the ZEW organisation, of which we wrote last week, the IFO is respected by the Forex markets. Its index is compiled by polling a large number of the people who matter in business. It has been in operation since 1949. This means that it started its work relatively quickly after the end of WW2. One has to suspect that its formation was an earnest of the German desire to get back into production after the conflagration, and represented putting to good use the funds provided by the Allies under the Marshall plan.
The IFO index has been rising for the last three successive readings. This, by itself, is regarded as a very strong indication of the continued health of the German economy. It can be expected that the recent devaluation of the Euro will not hurt today’s outcome, in which case the Single Currency could recover some of its losses.
There is life in the Euro outside of Greece
The Euro gapped up a little over the weekend anyway (although this gap has since been closed) on the news that a deal has been agreed to extend the Greek bailout for a further four months, during which time the new government is supposed to put forward its own plans for the reformation of the Greek economy. This must be done in a manner that will satisfy its international lenders, the ECB, the IMF and the other Eurozone governments, with the German finance authorities to the fore.
Whether or not they can do this in a way that does not include anything that can be described as “austerity” remains to be seen. Their ability to achieve a good package will have a strong bearing on the manner in which they will be treated by the Greek electorate after the honeymoon is over, which will be soon. There is little reason to believe that the voters of Greece are any more forgiving towards electoral promise disappointment than those that exist anywhere else.