* Business climate falls first time in five months
* Ukraine standoff clouds firms' outlooks
* Current situation remains strong for German companies
(Adds comment, reaction)
By Annika Breidthardt
BERLIN, March 25 German business morale dropped
for the first time in five months in March as firms in Europe's
largest economy began to worry that a standoff with Russia and
further sanctions over Ukraine would hurt them in a key market.
The business climate index by Munich-based Ifo think tank
fell to 110.7 from 111.3 in February, data showed on Tuesday,
missing a consensus forecast for it to drop to 111.0.
The closely-watched indicator is based on a monthly survey
of some 7,000 firms.
"The March dip in Germany's Ifo index provides further
evidence that the Ukraine crisis is spilling over with negative
effect to hurt business confidence," said David Brown of New
View Economics. "Germany's recovery could be put at risk the
more the crisis deepens."
U.S. President Barack Obama and major industrialised allies
warned Russia on Monday it faced damaging economic sanctions if
President Vladimir Putin takes further action to destabilise
Ukraine following the seizure of Crimea.
Germany receives more than a third of its gas and oil from
Russia. More than 6,000 German firms are active there and
business associations and trade bodies have already warned that
an escalation would result in catastrophic losses for firms.
However, even though expectations for future business
dropped, firms continued to be more upbeat about their current
situation, Ifo President Hans-Werner Sinn said.
Data last week already showed German analyst and investor
sentiment plunged in March at the fastest pace in nearly a year
on fears over Ukraine. Firms have also reacted.
Lemken, a German manufacturer of ploughs and other farm
machinery, has seen a big drop-off in orders from Russia, its
second-biggest export market after France, in recent weeks as a
sliding rouble raises their sale price.
German generic drugmaker Stada Arzneimittel on
Monday scrapped its 2014 outlook, blaming a slide in the Russian
and Ukrainian currencies against the euro and uncertainty over
business prospects in Russia, its second-biggest market.
Germany's "wise men" council of economic advisers said last
week that the Ukraine crisis was the biggest threat to growth
globally, and especially in Germany, because of Russia's
importance as an energy exporter.
(Reporting by Berlin Newsroom; Editing by Stephen Brown)