Germany's ZEW indicator of confidence among professional investment analysts sagged to a 20-month low in August.
The ZEW institute said Tuesday its index fell to 8.6 from 27.1. Market observers had expected a fall to only 17.0.
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Fears about a possible escalation of the crisis in Ukraine have weighed on Germany business confidence in recent weeks.
Analyst Christian Schulz at Berenberg bank said the slump confirms "near-term downside risk" from the Ukraine crisis "but does not change the fundamentally positive outlook" for Germany and the 18-country eurozone as a whole.
Some analysts think that Germany's economy, Europe's biggest, was flat in the second quarter that ended June 30 but is picking up in the third quarter.
Official second-quarter figures are out Thursday.