The people running German companies have become more optimistic.
That was the finding of the latest survey of 7,000 firms by the Munich-based Ifo think tank.
Business sentiment this month rose to its highest level in just over two years.
However, there was a slight dip in future expectations based on a belief that the economic recovery will slowdown at the end of the year as the government withdraws stimulus measures.
Ifo economist Kai Carstensen said Berlin has no choice: “We are now in a situation in which budget cuts are of the essence. We have to be prudent, but determined and that way there’ll be no need to increase the public debt.”
German Chancellor Angela Merkel has proposed 80 billion euros in budget cuts in the next four years.
This Ifo survey contrasted with a big fall in German investor confidence earlier this month on worries that the sovereign debt crisis will reduce demand in the euro zone for German exports.