* Largest single monthly rise since survey began * ECB action and upbeat data cited as main drivers * Greece, euro zone still main risks for German GDP By Sakari Suoninen and Kirsti Knolle MANNHEIM, Germany, Jan 17 (Reuters) - German analyst and investor sentiment posted a record rise in January, data showed, hinting at a turning point for Europe's largest economy after a small contraction late last year. The Mannheim-based ZEW economic think tank partly attributed the surge in its headline monthly economic sentiment index to optimism over the policy response to the European debt crisis. Germany has shown more resilience to troubles elsewhere in the euro zone, after fiscal prudence, steady demand for its high-quality products, and high competitiveness helped it weather a tough global environment. Robust economic growth enabled it to more than halve its initial planned new borrowing in 2011 and take the moral high ground in urging ailing euro zone peers to save and consolidate, after busting euro zone deficit rules itself in 2010. The ZEW report was the latest in a handful to paint a brighter picture of the economy. The index rose to -21.6 from -53.8 in December, the largest single monthly increase since the survey started in 1991, driving the euro to a session high versus the dollar. "(It's) generally a good indicator of an economic turning point," said Andreas Scheuerle from Dekabank. "With a certain delay, we could expect an end of the phase of economic weakness in Germany." Germany's export-driven economy recovered quickly from the 2008/09 financial crisis, but began to feel the pinch late last year as the Greek debt crisis spread to its trading partners. Gross domestic product shrank by around 0.25 percent in the last three months of 2011, the Statistics Office said last week, after the economy outperformed peers for the main part of the year thanks to strong domestic demand and exports. But overall, GDP grew 3 percent last year -- a level ZEW considers robust and a reason for optimism especially as growth is gaining increasing support from consumption. German companies have also fared reasonably well. Carmaker Volkswagen bucked a declining market trend with sales up 9 percent in December in contrast to slumping sales at French carmarkers PSA Peugeot Citroen and Renault. ECB SUPPORT The ZEW figures blew past the consensus forecast given in a Reuters poll of analysts last week, which had expected a rise to -50.0. A separate sub-index measuring current conditions rose to 28.4 from 26.8, beating a forecast for 24.0. ZEW economist Michael Schroeder said the rise was driven by upbeat economic data as well as the European Central Bank's massive injection of cash on the markets last month, which has left banks awash with money. "It seems that the worst of the euro zone crisis might be over due to the reaction of the central bank and the rescue mechanism," he said. To help fight the euro zone crisis, the ECB provided banks in December with nearly half a trillion euros of cheap 3-year loans, which it says is helping banks and supporting morale across the euro zone. Economists agreed this was boosting sentiment, even though banks have been hesitant to lend all the fresh money and are parking it in overnight facilities at the ECB at record levels. "Diminishing tensions in the sovereign bond markets of crisis-hit countries since the 489 billion euro 3-year auction of the ECB have led to a period of calm on financial markets," said Christian Schulz from Berenberg. Most analysts expect Germany to be able to rebound swiftly from weakness in the winter months as employment levels remain high and paltry interest rates persuade consumers to spend rather than save. Joblessness fell in December to its lowest level since reunification two decades ago, while an index covering the services industries showed new orders and jobs growth helped the private sector to expand. However Germany remains heavily dependent on trade with its struggling European trading partners, accounting for more than a quarter of GDP. Many economists have cut their 2012 growth forecasts accordingly. The Bundesbank expects growth of 0.6 percent this year, less than the government's official forecast of 1.0 percent, while think tank IMK has even predicted a mild recession. The ZEW survey of 293 analysts and investors was mainly collected before ratings agency Standard and Poor's downgraded some euro zone member states and negotiations between cash-strapped Greece and its creditors hit an impasse. "The euro-zone debt crisis is unlikely to leave Germany unscathed," said Ben May, from Capital Economics. "In all then, the latest ZEW reading does not alter our view that Germany will fall back into recession."