By Shamim Adam and Jacob Greber March 10 (Bloomberg) -- Confidence in the world economy dropped for a second month in March amid concern the fallout from Greece’s budget crisis will undermine the global recovery, according to a Bloomberg survey of users on six continents. The Bloomberg Professional Global Confidence Index fell to 53.8 from 54.9 in February. The index exceeded 50 for an eighth month, which means there were more optimists than pessimists. Sentiment declined in Europe, where leaders have signaled the euro region is ready to rescue Greece should the government struggle to fund its budget deficit. The impact on confidence from budget shortfalls suggests policy makers may need to rein in fiscal stimulus efforts before evidence emerges of sustained recoveries in some economies. Standard & Poor’s and Moody’s Investors Service said they may cut Greece’s credit rating in coming months, while the euro has dropped against the dollar this year on speculation the budget crisis will destabilize the region. “Confidence has been a bit shaky with Greece being a timely reminder that governments need to adhere to fiscal discipline,” said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore, and a regular survey participant. “Governments are starting to consolidate their fiscal positions and not looking to expand their spending plans anytime soon.” Central Banks The survey of 1,612 Bloomberg users was done between March 1 and March 5. Since the previous survey, the Federal Reserve raised the rate charged to banks for direct loans and China told lenders to set aside a bigger proportion of deposits as reserves for the second time this year. The European Central Bank last week said it will tighten the terms of its three-month market operations next month as it left its benchmark rate at a record low of 1 percent. The confidence gauge for Western Europe fell to 41 from 49.8 as Greek Prime Minister George Papandreou struggled to convince investors his government was serious about taming Europe’s biggest budget deficit, which has stoked financial market turmoil since January. Greece faces more than 20 billion euros ($27 billion) of debt redemptions in April and May and needs to sell 53 billion euros of debt this year. It sold 5 billion euros of 10-year securities on March 4, offering investors an interest premium of 0.32 percentage point over existing debt. “The problem about Greece’s debts is not solved, it’s only put off,” said Reto Huenerwadel, an economist at UBS AG in Zurich who participated in the survey. “I am moderately optimistic for the global economy.” ‘Circuit Breaker’ Euro-area growth almost ground to a halt in the fourth quarter, while unemployment held at the highest level in more than 11 years in January. The European Commission last month said the economy may fail to gather strength for most of 2010. A measure of U.S. participants’ confidence in the economy rose to 48.5 this month from 41.3 in February. The American unemployment rate held at 9.7 percent and payrolls fell less than forecast last month, indicating a strengthening labor market. Service industries accelerated more than anticipated in February, while manufacturing expanded for a seventh month, the Institute for Supply Management said. Asia’s index rose to 75.9 in March from 70.8, while the confidence gauge for Japan climbed to 44.8 from 40.6. Asia Pacific nations are leading the recovery from the global recession and the region’s central banks including Australia, Malaysia and Vietnam have raised interest rates to avert asset bubbles and keep inflation contained. Latin America In Latin America, the region’s index rose to 74.5 from 64.6, while the gauge of confidence in Brazil’s economy was little changed, at 86 from 85.8. Foreign investors are pumping money into Brazil’s economy as the country builds houses, roads and stadiums for the 2014 World Cup soccer tournament and the 2016 Olympic Games in Rio de Janeiro, prompting Luciano Coutinho, president of state development bank BNDES, to say on March 3 that Latin America’s largest economy may overheat as too much overseas investment flows into the country. Investors became the most bullish on the U.S. dollar since the collapse of Lehman Brothers Holdings Inc. The dollar confidence index rose to 66.4 from 55.7 in February. Survey respondents in Europe turned more pessimistic on the outlook for the euro, expecting it to weaken against its U.S. counterpart over the next six months. Most Bloomberg users were less pessimistic on the outlook for their equity markets in the next six months, with indexes rising in the U.S., Japan and Spain. Survey participants in the U.S. remained confident short-term interest rates will rise in the next six months, while most in Europe were less optimistic on the likelihood of higher borrowing costs, the survey showed. To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

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