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BERLIN, March 25 (Reuters) - German corporate sentiment deteriorated in March to its lowest level since reunification in 1990, suggesting Europe's largest economy has yet to bottom out, a closely-watched survey showed on Wednesday.
The Ifo economic research institute said its business climate index, based on a monthly poll of around 7,000 firms, fell to 82.1 from 82.6 in February. A Reuters poll of 45 economists had pointed to a reading of 82.2.
"These data are a reminder of just how bad conditions are in Europe's largest economy, and put paid to any thoughts of a swift rebound in activity," said Colin Ellis, European economist at Daiwa Securities in London.
The euro fell briefly against the dollar after the release of the data, before recovering to trade higher.
The German economy has made a weak start to 2009, with industrial orders slumping 8 percent and output by a record 7.5 percent in January. Pointing to these declines, Commerzbank forecast on Monday a contraction in GDP of 6 to 7 percent in 2009, easily the gloomiest outlook of any leading bank or think tank.
Reflecting the current weakness, an Ifo index of current conditions fell to 82.7 from 84.3 in February. A separate expectations index edged up to 81.6, its highest level since September 2008, from 80.9.
"The current situation is still deteriorating, showing that the lower turning point has not yet been reached," Ifo's Gernot Nerb said. However, he told Bloomberg Television: "Expectations are signalling that we will probably relatively soon reach the lower turning point."
German companies are feeling the slowdown, with retail group Metro saying on Tuesday it expected growth to slow this year. "The global economic downturn is likely to deepen this year," Metro Chief Executive Eckhard Cordes said.
Economy Minister Karl-Theodor zu Guttenberg also said on Tuesday the economy had not yet bottomed out. Ifo chief Hans-Werner Sinn said last week the economy would contract by over 4 percent this year.