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.
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