An index of German investor optimism rose more than expected in December, suggesting market professionals think Europe's largest economy will avoid an outright recession.
The ZEW indicator of economic sentiment rose to plus 6.9 points, from minus 15.7 in November. Markets had expected the index to rise only to minus 11.5.
Wolfgang Franz, head of the ZEW, or Centre for European Economic Research, said Tuesday the results showed that while German growth would cool off through the rest of the year but that Germany will "not have to face a recession."
However, he said that largely depended on the debt crisis afflicting the 17-country eurozone does not deepen again.
Though market fears that a European government will need a bailout or default on its debt have eased in recent months, the news that Italian Prime Minister Mario Monti plans to leave office ahead of schedule has renewed some tensions this week. Monti's announcement came at the very end of the survey period, on Saturday.
ZEW surveyed 278 investment professionals from Nov. 26 through Dec. 10.
Germany's economy grew a modest 0.2 percent in the third quarter and expectations are for another weak quarter in the last three months of the year.
Other indexes of business optimism such as Germany's Ifo index and surveys of purchasing managers have also risen recently.
Berenberg Bank senior economic Christian Schulz said the ZEW result indicates that the European Central Bank's forecast for the eurozone as a whole next year may be too pessimistic.
Last week, the ECB said the eurozone would likely contract 0.3 percent next year as opposed to its previous forecast of 0.5 percent growth.
"This could spring positive surprises for them in the new year and thus reduce the likelihood of any further rate cut," Schulz said.