BERLIN (AP) – German investor confidence improved in January as the government put together a new stimulus package for Europe’s biggest economy and the European Central Bank cut interest rates again, a closely watched survey showed on Tuesday.

While the ZEW institute’s survey showed financial experts’ outlook for the next half-year brightening for a third consecutive month, confidence remained very low.
The monthly index rose to minus 31 points from minus 45.2 in December. That was still far below its historical average of a positive 26.5 points.
The ZEW pointed to optimism about the new 50 billion euros (66 billion dollars) stimulus package that Chancellor Angela Merkel’s government drew up last week.
The plan includes investments in infrastructure, tax relief, reductions in health care contributions and bonuses for families with children. It adds to an earlier plan worth 23 billion euros, which was criticized at home and abroad as too cautious.
“Experts reckon with positive effects of the stimulus package especially in the construction sector,” ZEW said in a statement. “Moreover, the ECB policy of lowering interest rates should stabilize the economy.”
The ECB last week cut interest rates for the 16-nation euro zone by a half percentage point to 2 percent.
The new stimulus package “brought back some optimism,” UniCredit economist Andreas Rees said, noting that incoming President Barack Obama also is expected to cut taxes and boost government spending in the U.S.
“Second, the improvement in expectations is based upon one major principle of human life: hope,” he added.
However, the ZEW survey showed investors’ view of current conditions still worsening. A subindex measuring that assessment declined 12.6 points to minus 77.1, the lowest in five years.
The German economy, Europe’s biggest, went into recession last year and is expected to shrink this year.
Rees said the latest ZEW reading is in line with the widespread view that “in six months’ time the worst ... will be over and stabilization — zero growth — should set in.”
The government is set to issue a revised 2009 growth forecast on Wednesday. Rees predicted a roughly 2.5 percent contraction in gross domestic product this year.
That would be easily Germany’s worst performance since World War II. The worst since then was a 0.9 percent contraction of the West German economy in 1975.
The survey by the Mannheim-based ZEW, or Center for European Economic Research, was based on responses from 312 analysts and financial market experts.