Feb. 12 (Bloomberg) -- Investor confidence in Germany unexpectedly rose in February on expectations tax rebates and interest-rate cuts in the U.S. will spur demand for German exports.

The ZEW Center for European Economic Research said its index of investor and analyst expectations for the next six months rose to minus 39.5 from the 15-year low of minus 41.6 last month. Economists expected a drop to minus 45, the median of 32 forecasts in a Bloomberg News survey showed.

The euro erased declines and Germany's DAX stock index climbed, paring its drop this year to 15.3 percent, after the reading. While concern has mounted that a U.S. slowdown would infect the euro area, the damage to Europe's largest economy may be limited. German business confidence unexpectedly rose from a two-year low last month and unemployment fell to the lowest level in 15 years.

``Regarding the U.S., expectations made a jump,'' said Michael Schroeder, an economist at Mannheim-based ZEW. ``The lowest point'' in German growth ``should be in the second quarter, followed by an improvement in the business cycle.''

The U.S. Federal Reserve lowered its benchmark rate a half- percentage point to 3 percent on Jan. 30, following a three- quarter point emergency cut eight days earlier. The U.S. Congress this month passed $168 billion of fiscal measures to boost spending by consumers and businesses.

`Growth Course'

The euro was little changed at $1.4522 at 12:57 p.m. in Frankfurt after being down to $1.4496. The DAX gained as much as 1.5 percent, led by MAN AG and Daimler AG.

``The European and German economy is very robust,'' German Finance Minister Peer Steinbrueck said today in Brussels. ``We are not facing a recession. We are facing a slowdown of economic development.''

German industrial production rose the most in four months in December, led by durable consumer goods such as washing machines and flat-screen televisions. The jobless rate declined to 8.1 percent last month from 12.1 percent in March 2005.

``The German economy remains on a growth course,'' Deutsche Bank AG Chief Executive Officer Josef Ackermann said last week. ``However, the strong upturn is coming to an end.''

The Bundesbank expects consumer spending to recover over the next two years, offsetting a slowdown in exports. The bank forecast the economy to expand by 1.9 percent this year and next after 2.5 percent in 2007.

`Underestimating' 2008

``The ZEW survey suggests that GDP growth remains weak for the time being,'' said Juergen Michels, an economist at Citigroup Inc. in London. ``However, after overstating GDP growth on the upside in 2007, the ZEW survey might underestimate GDP growth in early 2008.''

Financial institutions around the world face $400 billion of write-offs as a consequence of the U.S. subprime mortgage crisis, according to Group of Seven estimates, Steinbrueck said on Feb. 9.

The world's biggest financial companies have booked more than $145 billion of writedowns and losses since the beginning of 2007, partly because of the declining value of securities backed by assets including U.S. subprime mortgages.

UBS AG, Europe's largest bank by assets, last month posted the biggest loss ever by a bank after raising fourth-quarter writedowns to $14 billion.

The ZEW's gauge measuring investor sentiment about the current situation fell to 33.7 from 56.6. That's the lowest since September 2006.

Economic `Illusion'

``It's by far too early to see a bright spot,'' in the current data, said Christoph Hausen, chief economist at Eurohypo AG in Frankfurt. ``It's an illusion to believe that private consumption will be the growth engine in Germany.''

Risks remain ``that further shocks may lead to a prolonged recurrence of the acute liquidity pressures experienced last year,'' Bank of Italy Governor Mario Draghi said this weekend. ``It is likely we face a prolonged adjustment, which could be difficult.''

Germany's gross domestic product may weaken this year as export growth, accounting for a third of jobs in the country, is expected to slow to 5.8 percent from 8.3 percent, the Economic Ministry said in a report on Jan. 23. Risks to the outlook ``lie in a spread of the U.S. housing crisis to banks and investors worldwide.''

To contact the reporter on this story: Christian Vits in Frankfurt cvits@bloomberg.net

Last Updated: February 12, 2008 07:22 EST