European venture capital investments s continued their decline in the second quarter of 2008 — there were only 167 deals completed, the fewest in at least nine years

A total of EUR 858 million ($1.266 billion) was invested in Q2, marking a 35 percent drop from the same period last year,

That drop is particularly dismal when you realize that 2007 wasn’t exactly a banner year for venture investment either; in fact, it also represented a record low.

As in the United States, where VentureSource’s numbers show VC investment falling by 31 percent during the first six months of 2008, analysts blame the dearth of venture dollars on the weak market for IPOs and mergers/acquisitions.

At least Europe appears to have one advantage — unlike the U.S., where most of the money goes to sustain older companies as they wait for the public markets to improve, 44 percent of European investment went to early-stage deals, the highest since 2001. So at least a healthy amount of money is supporting the development of new companies, rather than just sustaining the existing ones.

As you might expect given the overall decline, investment in most industries fell too. Health care, for example, shrank to EUR 164 million, a 55 percent drop from the same period last year. The energy sector seems to be doing well, however, with a record high of EUR 147 million invested in 10 deals, including an EUR 85 million investment in German photovoltaic company Sulfurcell Solartechnik.

German investments in general appear to be heating up, with a 29 percent increase since Q2 2007, making Germany the venture leader for the first time since 2001. Here’s a list of investments, by country, in millions of Euros.