Berlin - Business confidence in Germany remained unchanged in February, economists expect a key survey to be released Tuesday to say, as boardrooms in Europe's biggest economy face up to a dramatic economic slump.

In a major test of the economic mood in Europe, the closely- watched Ifo business confidence index is forecast to have come in at 82.9 points this month after posting a surprise increase to 83 points in January.

The January rise came amid hopes that the round of hefty global interest rate cuts and big government stimulus packages would help to form the basis of an economic pickup later in the year.

German investor confidence also jumped in February to record its fourth consecutive monthly increase on the back of expectations that an economic recovery should emerge as the year unfolds.

Drawn up by the Mannheim-based Centre for European Economic Research, the ZEW index rose by a much-larger-than forecast 25.2 points to minus 5.8 this month amid forecasts that the European Central Bank will press on with its rate-cutting cycle.

That said however, grim economic indicators and data have continued to roll in with the German economy having shrunk by 2.1 per cent in the final quarter of 2008.

Also looming large over the German business world has been signs that the global economic crisis was resulting in financial strains emerging in parts of the 16-member eurozone as well as Central and Eastern Europe.

On Tuesday Deutsche Bank chief economist Norbert Walter warned in an interview with Germany's daily Bild that the nation's economy could contract by more than five percent in 2009 if a "real recovery" did not start to materialize by the middle of the year.

Based on a survey of 7,000 German executives and drawn up by the Munich-based Ifo economic research institute, the German business index plummeted in December to
82.6 points, which was its lowest point since the 1980s oil crisis.

But many economists believe that the German economy might now have started to bottom out, after the implosion of America's Lehman Brothers in September helped to send the world economy into a sharp decline in the last months of 2008.

While the business leaders' assessment of the current climate in Germany has helped to check the rise in the index, the indicator's component gauging expectations six months down the track has gained ground expectations of an economic upturn later in the year.

But in the meantime, new European indicators published Friday pointed to concerns that the economic downturn has been gaining momentum across Europe with confidence in the eurozone's manufacturing and services sectors slumping.

Business confidence in France, the eurozone's second biggest economy, plummeted to its lowest level in more than 40 years, a survey released Friday said. (dpa)