Beat the egg yolks with 1/2 cup sugar until the mixture is very thick.
Fold in the ground hazelnuts and flour.
Beat the egg whites until soft peaks form.
Add the remaining 1/4 cup sugar and beat until stiff.
Mix 1/3 of the egg whites into the batter until thoroughly combined.
Fold in the remainder carefully.
Place the batter, which will be quit stiff, in a well buttered and floured 8 inch spring form cake tin or other cake pan with 1 1/2 inch sides.
Bake in a preheated 350o oven for 40 to 45 minutes or until the cake tests done.
Cool 5 minutes in the pan then remove to a wire rack.
Mix together the confectioners' sugar, water and vanilla until smooth.
Ice the top of the cake with the sugar mixture and decorate with hazelnuts.