German investor confidence plunged to its lowest point in six months in May, according to economic think tank ZEW.
Schroeder is grappling with record German unemployment
The organisation said confidence had dropped from 20.1 points in April to 13.9 points in its May survey of 298 analysts and institutional investors.
Separately, the OECD lowered its growth forecasts for Germany.
Weak growth may put more pressure on Chancellor Gerhard Schroeder, who on Sunday said he would hold a vote of confidence on 1 July.
The move followed a crushing defeat for his party in North Rhine-Westphalia at the weekend. If Mr Schroeder loses the vote, as he is widely expected to, it could precipitate an early general election.
Economic problems and high unemployment are undermining confidence in Mr Schroeder's leadership.
Germany's economy has been hard hit by high oil prices and a rise in the euro. Unemployment is at a post-war high of around five million.
The Organisation for Economic Co-operation and Development(OECD) has now slimmed-down its 2005 growth forecast for the German economy, from 1.2% to 1%.
And the Paris-based body has also cut its 2006 forecast for Europe's largest economy to 1.6%, from 2.1%. The revised figures match the German government's own projections.
For the January-to-March period, the German economy beat economists' expectations, growing by 1.0% compared to a 0.1% contraction in the previous quarter.
This was its best quarterly growth rate in four years, but was driven solely by a rise in net exports, the country's Destatis statistical bureau said.
And the OECD also noted the exports-driven figures, stating that German growth was too "heavily dependent on foreign demand".
ZEW President Wolfgang Franz also warned that that slowing global growth would harm German exports.
"With domestic demand still weak, the German economy is very dependent on global economic developments," he said.
The ZEW figure for May was the lowest since November 2004, and followed a previous fall in April.