By Javier Espinoza
London—Confidence among businesses in Ireland and Greece has fallen steeply, according to an annual survey that measures business sentiment at the beginning of 2011.
By contrast, optimism in Germany, Belgium and Finland has increased significantly for the year ahead.
Grant Thornton's International Business Report, which surveys over 5,700 businesses across 39 countries on their levels of business confidence for 2011, showed optimism in the overall euro zone up 20 points, to 22, from 2 a year earlier.
The Grant Thornton figures represent the percentage of companies reporting they are very or slightly optimistic, minus those reporting they are slightly or very pessimistic. A negative number means more responders are pessimistic than optimistic. Zero is neutral.
Germany is the most optimistic nation in the euro zone, with confidence among business leaders at 75, up 37 points, from the start of 2010. Finland, up 67 to positive 57 from -10 a year ago, and Belgium, up 32 points to 45 from 13 a year ago, are also experiencing high levels of optimism.
However, business confidence is down 3 points in Ireland to -45 from -42 a year earlier, and down 21 in Greece to -44. Both face soaring deficits and high unemployment. Spain, however, saw confidence increase by a modest 6, but still stood at -50 from -56 a year earlier.
"There are starkly diverging levels of confidence in Europe despite overall optimism being up significantly in the euro zone over the last year," said Alex MacBeath, global leader at Grant Thornton.
Strong growth in gross domestic product, rising exports, higher employment and shrinking budget shortfalls are factors that have contributed to an increase in German confidence, Mr. MacBeath said. "A very robust economic picture overall translates into optimism in the business community."
However, sovereign debt problems and a fiscal squeeze in Spain, Ireland and Greece have meant more pessimism in businesses in those countries. "This is going to make for a difficult year in Europe as countries try to balance the need of economies pulling in the opposite direction," Mr. MacBeath said.
He said this posed the risk of volatility in the euro zone. "There is a risk of volatility in the financial markets. You need to encourage policies that support countries like Greece, Ireland and Spain to come out of their problems, but at the same time you don't want to do things that damage the robust economies like Germany or Finland," Mr. MacBeath said.
The survey of medium to large privately held businesses showed levels of optimism are the highest in Latin America. Chile came on top with a score of 95. "There is a very robust picture for business in Latin America in general," Mr. MacBeath added.
The report gathered the opinions of managing directors, chairmen or other senior executives during the last quarter of 2010. The industries surveyed include: manufacturing (25%), services (25%), retail (15%) and construction (10%).
WSJ
http://online.wsj.com/article/SB10001424052748704723104576061494160181556.html
