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Confidence among German investors nosedived in August amid tensions between Russia and the west which are expected to bring Europe′s largest economy to a standstill.

The ZEW indicator of economic sentiment plunged more sharply than expected to a 20-month low of 8.6 points from 27.1 points in July.

The index, which measures investors´ expectations for the economy in six months´ time, has fallen for eight consecutive months. Heightened geopolitical tensions are raising fears that the eurozone´s weak recovery will be snuffed out altogether, and that Germany´s economy will flatline.

As Russia´s biggest trading partner in the EU, Germany is expected to be one of the economies hardest hit by Vladimir Putin´s dispute with the west over his treatment of Ukraine, which has triggered sanctions and countersanctions.

"Fear is back," said Carsten Brzeski, an economist at ING. "The German ZEW just sent more signs of caution, showing that at least financial market participants are increasingly becoming pessimistic."

The decline in economic sentiment was the result of the geopolitical tensions that have begun to weigh on Germany′s growth.

Up to now, the fallout of the Ukraine crisis has been limited to a general return of uncertainty and a sharp drop in German exports to Russia. Obviously, a further escalation of the crisis could start to really hurt the economy. (Τhe Guardian)