Berlin: Business confidence in Germany improved in July after two monthly drops as an agreement between Greece and its creditors for talks on a third bailout lifted the mood at firms in Europe’s largest economy.

The Munich-based Ifo institute’s business climate index, based on a monthly survey of some 7,000 firms, rose to 108.0 from a revised 107.5 in June. That beat the Reuters consensus for a drop to 107.2 and sent the euro up to a two-week high against the dollar.

“Forget about Greece? This is at least how German businesses seem to look at Greek turbulences of the last weeks, judging from the latest Ifo numbers,” said Carsten Brzeski, an economist at ING.

The Greek crisis came to a head in early July, when the Greeks rejected a cash-for-reforms deal in a referendum, but the parliament in Athens has since agreed to reforms necessary for further aid.

Hans-Werner Sinn, president of the Ifo think tank, said the easing of that crisis had helped boost sentiment in Germany.

Another supporting factor was the nuclear deal Iran reached with world powers, Ifo economist Klaus Wohlrabe said.

Last week Germany and Iran pledged to re-establish economic ties in anticipation of Western economic sanctions against Tehran being lifted.

The Ifo survey showed companies facing the future with brighter expectations than last month and they also considered their current situation to be better.

The morale among companies in the manufacturing and wholesaling sectors picked up but it took a turn for a worse among retailers and construction companies.

Some German companies have reported strong results of late, with Daimler’s second-quarter operating profit hitting a record high while sportswear company Puma/ssold more than expected during that period.

German economic growth weakened to 0.3 per cent at the start of this year and the finance ministry said last week that the economy would probably expand by around the same amount between April and June, with domestic demand propelling growth while foreign trade resurged.

Jennifer McKeown, senior European economist at Capital Economics, said the Ifo survey showed the recovery was continuing despite Greece’s woes, albeit without gaining much momentum.