The US housing market crisis has hurt shares in Frankfurt

The ZEW Institute's latest monthly survey, which measures expectations for the next six months, sank to -32.5 points, from -18.1 in October.

The sharp fall shocked analysts, who on average had expected a reading of -20.

The ZEW said a weaker US economy would hurt German exporters, who are already being squeezed by higher energy costs.

The last time the ZEW survey was so weak was in February 1993 shortly after the reunification of East and West Germany.

In the past 18 months, the German economy has seen growing signs of a resurgence, led by the country's exporters.

But this recovery could now be stalled if the competitiveness of German exports is eroded by the weakening US dollar, which reached a record $1.475 against the euro last week.

"The weak US-dollar has made business conditions for German exporting firms more difficult," said ZEW president Professor Wolfgang Franz.

"It is therefore to be expected that the economic development may lose considerable speed."

Exporters suffer

The US currency has dropped sharply against the euro since the US Federal Reserve dramatically intervened to bring calm to financial markets by slashing rates from 5.25% to 4.75% in September.

But as the fall-out from the meltdown in the US mortgage market shows no sign of easing, German investors are convinced that the Fed will have to reduce rates further from their current level of 4.5% to prevent the world's largest economy slipping into a recession.

The 269 analysts and financial institutions interviewed by the ZEW believe that another rate cut would see the value of the dollar fall even further against the euro, which would make life even tougher for exporters.