Germany's investor confidence strengthened to a nine-month high in December despite the current budget crisis, survey results from the think tank ZEW showed Tuesday.

The ZEW Indicator of Economic Sentiment rose to 12.8 in December from 9.8 in November. This was the highest score since March and also came in above forecast of 8.8.

The assessment of current economic situation also improved slightly in December. At -77.1, the corresponding index was up from -79.8. The expected score was -76.0.

The reason for the improvement in overall sentiment was the fact that the share of respondents expecting interest rate cuts by the European Central Bank in the medium term has doubled, ZEW President Achim Wambach said.

This is good news for the German construction industry, Wambach added. Moreover, the share of respondents expecting inflation rates to fall further is declining.

Investor confidence in the euro area also strengthened in December, the survey showed. At 23.0 points, the economic sentiment index gained 9.2 points from November. On the other hand, the situation indicator weakened marginally by 0.9 points to -62.7 points.

The ECB is widely expected to keep its benchmark rates unchanged for the second straight meeting on December 14. The ECB had raised rates by a cumulative 400 basis points with hikes in every policy session of the latest tightening cycle that began in July last year.

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