Commenting on the latest ZEW Survey for Germany, "experts are pessimistic about the current economic situation and assume that it will continue to deteriorate," ZEW President Professor Achim Wambach said.

"The decline in inflation expectations, which cuts the previous month’s considerable increase by about half, gives some cause for hope," Wambach added. "However, the prospect of stagflation over the next six months remains."

Market reaction

Safe-haven flows continue to dominate the financial markets during the European trading hours on Tuesday. Germany's DAX 30 Index was last seen losing 1% on the day.