* Morale hits strongest level in reunified Germany
* Rise confounds expectations for a fall
* Rise is stronger than highest forecast in Reuters poll
* Current conditions, expectations indices both up strongly
(Adds economist comment, background)
By Brian Rohan
BERLIN, Nov 24 (Reuters) - German business sentiment rose in November to its strongest level since 1991, a survey showed on Wednesday, highlighting a rift in the euro zone as the bloc’s largest economy leaves smaller states behind.
The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 firms, rose to 109.3 from an upwardly revised reading of 107.7 in October, confounding expectations for a slight fall.
“The numbers confirm that the German economy is in very healthy shape and that it will probably continue to grow solidly and at a rate above the euro zone average in the coming quarters,” said Aline Schuiling from ABN Amro.
The euro EUR= rose after the release of the data -- which beat even the highest forecast in a Reuters poll of 40 economists -- before giving up its gains and falling. [ID:nLDE6AN0HE]
With both the current conditions and the business expectations indexes in the survey surpassing the consensus view, the headline figure landed at its highest level since survey data was first collected for a reunified Germany.
The business expectations index, which measures the outlook six months down the road, also hit its highest reading on record, further reinforcing the impression Germany was in the clear of problems affecting some of its euro zone partners.
“The German economy is returning much faster to its pre-crisis level than many had expected,” said Carsten Brzeski, economist at ING Financial Markets.
“Amidst new financial market turmoil and sovereign debt woes in the euro zone, the German economy seems to be an island of happiness,” he added.
Germany’s strong recovery has helped pull the euro zone to improved growth in recent quarters, but there are also concerns it may be leaving other struggling economies behind.
A purchasing managers’ survey on Tuesday showed a strong resurgence in private sector growth in Germany and France, offset continuing stagnation in countries like Portugal, Ireland and Spain which are battling debt and banking troubles.
Despite concerns that budget cutbacks across Europe next year will hamper growth, many German companies are upbeat.
Earlier this month, engineering group Siemens (SIEGn.DE) signalled its confidence with a proposed sharp rise in dividends and a promise of profit growth driven by emerging markets.
“We have seen for the first time a growth across our product range, driven particularly by the strong growth we have seen in emerging economies,” Chief Executive Peter Loescher said of Siemens’ fourth quarter, which runs to September 2010.
German exporters’ strength in emerging markets is helping the economy grow. Detailed third quarter gross domestic product (GDP) data released on Tuesday also showed a more balanced recovery taking hold, with steady growth in private consumption.
The robust German recovery contrasts with the financial crisis being endured in euro zone peer Ireland. The crisis is frustrating policymakers in Germany, which has profited strongly from the euro zone project.
Chancellor Angela Merkel said on Tuesday the euro was in an “exceptionally serious” situation, sending the euro lower.
Ifo Economist Klaus Abberger said that German companies were not being affected by Europe’s debt woes because the countries worst affected were not among Germany’s main export markets.
“It hasn’t affected business up till now,” he said.
For details of the Ifo survey, please click on [ID:nBAE003853] (Additional reporting by Paul Carrel, Sarah Marsh and Stephen Brown in Berlin, Christian Kraemer in Munich; editing by Patrick Graham)