2012.06.19 13:05:04 S&P: Greek Poll Cuts Risk of Disorderly Exit

--ZEW index falls the most since October 1998

--Greek elections seen just prolonging euro-zone uncertainties

--German economy not expected to return to recession in next six months

--ECB expected to cut rates by more of those polled than in May

MANNHEIM--German economic expectations in June fell the most in almost
14 years, reflecting the view that Greece's national election Sunday
gave only brief respite to the euro zone's "still precarious'
situation, the Center for European Economic Research, known as ZEW,
said Tuesday.

Sunday's elections just prolong the uncertainty over the fate of the
euro zone, which is "not a very good situation for countries
supporting Greece [such as Germany], ZEW economist Michael Schroeder
told journalists. "It now seems that leaving the euro isn't the choice
of the [new] Greek government, they will try to get more payments from
European countries."

Greece's two leading pro-bailout parties, seeking a broad coalition
government, are working on a proposal to ask other euro-zone countries
for an extra two years to meet fiscal targets, officials involved in
the preparations said. It would mean that on top of the EUR173 billion
($218.7 billion) bailout plan already agreed, Greece would need EUR16
billion more in financing, the officials said. It would give European
creditors, led by Germany, a dilemma. They are eager to help but
German Chancellor Angela Merkel is loath to raise the size of the
Greek bailout, as it may split her ruling coalition.

ZEW's economic expectations index fell to -16.9 in June from May's
unrevised 10.8. A negative value indicates that more participants
expect the economic outlook to worsen than those expecting it to
improve. The last time the decline in the indicator was this great was
in October 1998. A poll by Dow Jones Newswires showed expectations for
a fall to 2.8 for June.

"The outcome clearly shows a general sense of panic among investors,"
said Annalisa Piazza, economist at Newedge. "The data point to a
greater-than-expected recession" in the euro zone, Piazza added.

The declines in May and June follow a sharp improvement over the
previous months. After declining for nine months on the deepening of
Europe's sovereign debt crisis, the index turned positive in February.

"The financial market experts" expectations are a strong warning
against a too optimistic assessment of Germany's economic perspectives
in the remainder of this year," ZEW President Wolfgang Franz said in a
release.

Germany is not expected to return to recession over the next six
months, ZEW economists said. Still, its main trading partners are
experiencing an economic downturn, the euro zone's raging debt crisis
continues and a solution will be "anything but quick," ZEW economist
Marcus Kappler said. The Greek elections left Greece's unsustainable
economic situation unchanged, he added.

In response to the deteriorating economic outlook, more of those
polled now expect the European Central Bank to cut interest rates than
did in May. A majority still expect the ECB to leave its policy rate
unchanged in the next six months at its current historic low.

ZEW's current conditions index fell to 33.2 from May's unrevised 44.1.
A reading of 39.0 for June was expected, according to the Dow Jones
Newswires survey.

ZEW polled 274 analysts and institutional investors for its June poll.

Write to Margit Feher at margit.feher@dowjones.com

Write to Tom Fairless at tom.fairless@dowjones.com Write to Margit
Feher at margit.feher@dowjones.com


(END) Dow Jones Newswires

June 19, 2012 05:55 ET (09:55 GMT)