A key index of German business sentiment rose in January, bolstering expectations that Europe's largest economy will emerge from recession this year.

The Ifo economic research institute's business climate index rose for a third month to 86.3 from 85.8 in December. However, Ifo economist Gernot Nerb says it is just the "early stage" of a recovery. The index based on a survey of 7,000 businesses is closely watched by economists and investors.

Edmond Stoiber

Meanwhile, German Chancellor Gerhard Schroeder has conceded jobless figures are expected to top the politically sensitive four million mark this month. His conservative challenger in September national elections, Bavarian governor Edmond Stoiber, has been hammering at the government's economic record.

Some information for this report provided by AP and Bloomberg.

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