The hostages are "being held in contravention of all laws and without any reason," said Angela Merkel's spokesman Steffen Seibert in Berlin on Monday. "The German government strongly condemns this hostage taking," he added, and demanded the hostages be released "immediately, unconditionally and unharmed".
The militants in the town of Slavyansk presented the captured team of Organization for Security and Co-operation in Europe (OSCE) observers as "prisoners of war" on Sunday raising the stakes in the crisis as US President Barack Obama warned Moscow against "provocation".
The eight were taken in Slavyansk on Friday
and have since been held in the city's town hall. The rebels are also holding four Ukrainian OSCE representatives.
One of the OSCE observers, a Swede who was said to suffer from diabetes, was freed late on Sunday and has left Slavyansk's the town hall.
The most senior officer of the OSCE observers taken by the militia, German Colonel Axel Schneider, defended the mission to the region at the press conference on Sunday and denied claims by their captors that they were spies.
"We are not Nato," he said. "Our mission was transparent. All OSCE members including Russia knew about it."
German foreign minister Frank-Walter Steinmeier said in a statement on Sunday that Russia had a "duty" to free the hostages.
"Russia has the duty to influence the separatists so that the members of the OSCE who are being held will be released as soon as possible," Steinmeier said.
He also warned the separatists that publicly exhibiting the OSCE observers and Ukrainian security forces as prisoners was "repugnant and rides roughshod over the dignity of those concerned".
"This is a violation of all negotiating rules and norms that prevail in tense situations like this one," he added.
Steinmeier said Berlin was working with the OSCE to find a solution.