Berlin - Despite a brace of positive data for the German economy on Tuesday, Chancellor Angela Merkel warned against undue optimism at an employers' conference in Berlin. "We find ourselves on very volatile ground," Merkel said, adding that a new speculative bubble caused by low interest rates was possible.
Earlier in the day the Munich-based Ifo Institute reported that German business confidence had risen for the eighth consecutive month in November, as signs emerged that recovery is gaining ground.
Merkel announced that her government's subsidy for workers placed on short-time contracts would be extended by a year, in a bid to protect workers hit by slashed demand on world markets for Germany's export goods.
The Ifo business confidence index rose to a higher-than-expected 93.9 points, after it climbed to a revised 92.0 in October - its highest level in more than a year.
Analysts had predicted the index would rise to 92.5.
Ifo index's rise comes despite the euro's recent strong performance in recent months, which has fuelled concerns about the outlook for Germany's key export sector.
Based on a survey of 7,000 executives, the release of the Ifo index was also accompanied by a German statistics office confirmation that the nation's economy posted solid 0.7-per-cent quarter-on- quarter growth in the third quarter.
However Ifo expert Klaus Abberger warned that "The recession is not over by far, the risks are still there."
Germany's economy will grow by about 1.5 per cent in 2010 after shrinking by a sharp 4.9 per cent this year, the Paris-based Organization of Cooperation Economic and Development (OECD) predicted in its latest economic outlook report published last week.
The OECD previously forecast a German growth rate next year of a feeble 0.2 per cent.
Underscoring the lingering sense of uncertainty about the upswing underway in Germany, investor confidence in the nation posted its second consecutive monthly fall in November, a survey released this month showed.
The Mannheim-based Centre for European Economic Research's (ZEW) monthly index measuring the mood among German analysts and institutional investors slipped to 51.1 points this month.
Analysts had expected the ZEW index, which was based on a survey of 287 analysts, would drop to 54 points in November after it declined to 56.0 points in October.
Indeed, concerns have set in that a pickup in unemployment combined with the euro's ascent could end up slowing the pace of the German economy's recovery from what has been its biggest downturn in more than 60 years.
Combined with this, economists are worried that the dialing back of the German government's 85-billion-euro (126-billion-dollar) fiscal stimulus plan next year, along with a buildup in global public debt, could also undercut the nation's recovery from recession.
