FRANKFURT, Germany — Market concerns over the European economy are showing signs of growing after a closely-watched survey of German investors recorded a sharp drop in sentiment after five straight months of increases.
The ZEW institute reported Tuesday its main index dropped by 12.6 points to a level of 10.8 in May.
ZEW says the investors believe "the outcome of the elections in Greece and France has made it more doubtful that European governments will resolutely fight the sovereign debt crisis."
ZEW president Wolfgang Franz says in light of the recessions in several eurozone countries, "it is important to pursue austerity measures with sound judgment – growth and consolidation do not contradict each other."
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
Germany's economy grew by a greater than expected 0.5 percent in the first three months of the year as strong exports helped offset the impact of Europe's debt crisis.
The government statistics agency says exports helped the economy bounce back from a slight fall in output of 0.2 percent in the fourth quarter of last year. The first-quarter figure was well ahead of the 0.2 percent expected by market analysts.
Germany remains a standout performer despite Europe's troubles with too much debt in several countries. Unemployment is low and exports of manufactured goods such as automobiles and machinery remain robust.
The country is benefiting from changes to labor laws that it made in 2004 to lower business costs – changes Chancellor Angela Merkel is now urging debt stricken countries to make themselves as the best way to find long-term growth.
A growing economy is considered the most reliable way to shrink debt burdens like the ones plaguing Greece, Ireland and Portugal, all of which have needed bailout loans to be able to keep paying their debts.
Compared to the same quarter a year ago, Germany grew 1.7 percent.
The European Commission expects the economy in the 17 countries that use the euro to shrink 0.3 percent this year. Figures for first-quarter growth across the eurozone are due later Tuesday.