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German businesses have shrugged off Europe’s debt crisis with corporate optimism in the continent’s largest economy rising to its highest level for more than two years.

The Munich-based Ifo institute reported yesterday that its business climate index had risen from 101.5 in May to 101.8 this month – the highest since May 2008.

The unexpected rise, boosted by a weaker euro, highlighted the robustness of the export-led upswing under way in Germany.

But while businesses were more optimistic about current conditions than last month, they were markedly gloomier about prospects for the next six months. That pointed to weaker future growth – as a result of fiscal austerity measures and weaknesses in the banking system across the continent. Last month’s ZEW German investor confidence index showed the largest fall since Lehman Brothers collapsed in 2008.

Adding to the evidence of a still-intact recovery, the finance ministry in Berlin confirmed it had reduced its forecast of the government’s net borrowing requirement in 2010 by €15bn ($18.4bn, £12.4bn). That would take its borrowings to about €65bn.

The budget has benefited from a surge in tax revenues, with a 6.5 per cent upturn in value added tax receipts in May compared with the same month last year, according to media reports. Unemployment benefits have also fallen, with a steady decline in jobless figures this year, partly owing to the success of the government’s subsidy programme for short-time working. Economists expect the German economy to grow by 2 per cent or more this year, following a contraction of close to 5 per cent in 2009.

Optimism among German industrialists has brightened recently on the back of a surge in orders .

German carmakers Daimler, BMW and Audi have returned to full production and ended short-time working, driven by fast-rising demand from the US and China. In May, Daimler recorded a 41 per cent rise in sales of its Mercedes S-Class luxury saloon compared with a year before.

Separately, the VDMA industrial association reported German engineering sector orders were 36 per cent higher in April than a year earlier. “While the absolute level is still low, the dynamic [rise in orders] clearly points to an economic recovery,” said Hannes Hesse, VDMA managing director.

Release date: June 23, 2010