(Adds fresh economist comment, finance and economy ministers)
By Paul Carrel
BERLIN, March 25 (Reuters) - German business morale fell in March to its lowest level since reunification in 1990 on concerns that the recession in Europe's largest economy has yet to reach its low point.
The Ifo economic research institute said on Wednesday 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.
Ifo last recorded a lower reading in November 1982, though that reflected corporate sentiment in then-West Germany.
"The Ifo index leaves little room for hope of an economic stabilisation in the second half of the year," said Ulrich Wortberg at Helaba investment house.
The euro fell briefly against the dollar after the release of the data, before recovering to trade higher.
Finance Minister Peer Steinbrueck said the government would not be able to keep its forecast for the economy to contract by 2.25 percent this year, telling a banking conference: "Germany is in a deeper recession than we have known before."
Germany has made a weak start to 2009, with industrial orders slumping 8 percent and output by a record 7.5 percent in January as the trade-reliant economy suffers from a collapse in foreign demand.
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.
"It will take some time and a substantial confidence improvement to end the contraction," said Carsten Brzeski, economist at ING Financial Markets. "A recovery, worth its name, will only come in the course of 2010."
In neighbouring France, Germany's biggest trading partner, business confidence stuck at a record low in March as bosses fretted about empty order books.
SILVER LINING?
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.
Economy Minister Karl-Theodor zu Guttenberg said the rise in the expectations component leant hope to the prospect of the economy bottoming out this year.
However, Ifo economist Klaus Abberger said: "We don't see any signals of a turnaround yet."
"The speed of the decline is decreasing. But the bottom level is not yet in sight," Abberger told Reuters, adding that the European Central Bank should cut interest rates again.
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.
Ifo said retailers reported a more downbeat view of their current conditions, and their business outlook in March. Germans' retail habits are key to the overall economy's performance as consumer spending accounts for over half of GDP.
The VDA German Automotive Association said earlier this month that the market for German trucks plummeted in February, with new orders from abroad falling by 95 percent.
Ifo chief Hans-Werner Sinn said last week the economy would contract by over 4 percent this year.
For a table with details of the Ifo survey results, double click on (Additional reporting by Noah Barkin, Madeline Chambers, Kerstin Gehmlich and Rene Wagner; Editing by Andy Bruce)