Despite grim business news across the board, from more plant closings, business failures and job losses, European business confidence has picked up for the first time in 18 months, according to a quarterly survey by the Munich-based ifo economic research institute. After six successive reductions, the quarterly indicator of the economic mood in the 16-member Eurozone rose from 45.8 to 55.1 points. The survey is based on judgments of the current and future health of the economy by experts working for multinational corporations and economic institutes within the Eurozone.

The upturn in the second- quarter figures resulted from an improved confidence that the economy would pick up in coming months. The index of future expectations rose from 49.6 to 76 points, with all countries except Greece predicting a degree of economic recovery. “In contrast, the judgements on the current economic situation have further worsened, reaching a new historic low,” ifo President Hans- Werner Sinn said. The index judging the current economic climate plummeted from 41.1 to 29.9 points. Economists in Germany, Italy, Belgium and Luxembourg predicted an improvement, while Austrian, French and Dutch experts thought the economy would stabilise in the coming six months.

Annual inflation was expected at one percent, which is significantly lower than the target rate of the European Central Bank. Whether people are whistling through the graveyard isn’t clear yet though, as many EU countries said they are still struggling with record high levels of unemployment and doubt about when they will recover, despite some gains in stock markets in the United States and Europe. As Spain struggles to rise out of its worst economic slump in 60 years, the government is beginning to seek alternatives to the growth model the country had followed for decades, especially after its leaders admitted they had failed to see the trouble coming.

Spain can no longer rely on the property sector as one of the main drivers of the economy, Prime Minister Jose Luis Rodriguez Zapatero said, announcing measures aimed at diversifying and modernising the economy. For over a decade, Spain’s growth and job creation figures were among the highest in the European Union, with the economy growing steadily at more than three percent. While the international crisis is affecting other EU countries as well, hardly any have been hit as hard as Spain, where half of the layoffs within the EU occurred between February 2008 and February 2009.

Nearly 90,000 mainly small and medium-sized Spanish companies went bankrupt in the first three months of this year, and the Bank of Spain expects the economy to shrink about three percent in 2009. The 17 percent unemployment - twice the EU average - will soar to 20 percent before the economy will slowly start recovering in 2011, the European Commission forecasts. The number of unemployed - more than four million - is the highest on record. The German economy shrank in the first quarter of 2009 by 3.8 percent, the Federal Statistics Office said.

The quarter was the fourth in a row where German gross domestic product (GDP) shrank in comparison with the previous quarter, and the sharpest drop since the statistics began in 1970. Revised data show the economy shrank 2.2 percent in the fourth quarter of last year. Germany is now in the deepest recession since the end of the Second World War. Most economists had not expected such a severe fall. However analysts said there have signs of a steadying in April and this month. Germany’s contraction has also pulled down the European Union, with statisticians saying EU first-quarter GDP was down 2.5 percent from the previous quarter.

In comparison to the first quarter of 2008, price-adjusted GDP in Germany slumped by 6.9 per cent in calendar-adjusted terms. As the world’s biggest exporter, Germany has been hurt by the global slump in demand for goods and services. Statisticians at their office in the central city of Wiesbaden said the shrinkage was clearly caused by a decline in exports, not a fall in German private and government demand, which had risen slightly. Business investment in the first three months was also down “significantly” in quarter-on-quarter terms.

The decline surpasses the previous German record, a contraction of 2.5 percent in the first quarter of 1987 when winter cold disrupted output. Bank economists have said in the past few days that the slump is bottoming out. Commerzbankpredicts a contraction of only 0.5 to one percent in the second quarter, and UniCredit suggests the shrinkage will be limited to 0.5 percent. But the first-quarter will leave a scar on the fullyear data. Most economists say the German economy will shrink six percent this year.