Jul 27, 4:57 AM EDT

Survey shows unexpected upturn in German business confidence as Greece worries subside

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BERLIN (AP) -- Business confidence in Germany, Europe's biggest economy, has risen unexpectedly this month as worries over Greece have subsided, a closely watched survey showed Monday.

The Ifo think tank's monthly confidence index increased to 108 points for July from 107.5 in June. Economists had expected a slight decline to 107.2, which would have been a third consecutive drop.

Ifo said that managers' assessment of their current situation and their outlook for the next six months both improved, defying expectations that they would slip. The institute's president, Hans-Werner Sinn, said in a statement that "the recent easing of the Greece situation contributed to stronger sentiment in the German economy."

A preliminary agreement earlier this month on a new bailout for debt-laden Greece dampened fears of a potentially disruptive Greek exit from the 19-nation euro currency, though a full deal still has to be hammered out.

The German economy has been helped lately by low unemployment and increasing domestic demand, and has been growing even as other European countries struggle.

It is still being bolstered by a weak euro exchange rate and low energy prices, said Carsten Brzeski, chief economist at ING-DiBa in Frankfurt. "Even if the dose has been reduced somewhat, the German economy is still on steroids," he added.

Risks looking ahead include longer-than-expected periods of weakness of the U.S. and the Chinese economies, both of which are major German export destinations, and a possible new flaring of the Greek crisis, he said.

Ifo polls around 7,000 managers each month on their assessment of the economy.

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