Fear overwhelms German defeat, taking a very optimistic view (10)

I believe the answer is:

panglossic

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'defeat taking a very optimistic view' is the definition.
I can't tell whether this definition defines the answer.

'fear overwhelms german' is the wordplay.
'fear' becomes 'panic' (panicking is a kind of fearing).
'overwhelms' indicates putting letters inside.
'german' becomes 'gloss' (I can't justify this - if you can you should give a lot more credence to this answer).
'panic' enclosing 'gloss' is 'PANGLOSSIC'.

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I've seen this clue in The Guardian.

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