German business confidence has unexpectedly surged to the highest level for at least 15 years, highlighting the strength of Europe’s largest economy despite a stronger euro and a big VAT hike looming next month.

The Munich-based Ifo institute’s business climate index leapt from 106.8 in November to 108.7 this month. That was the strongest reading since the pan-German survey started in 1991, shortly after reunification and suggested that the German economy would remain on a strong footing well into 2007.