* German businesses shrug off Ukraine crisis
* Ifo surprise rise signals German economy is in "very good
* Firms see war as unlikely, effect on economy limited -
* Graphic: link.reuters.com/kyc48t
(Adds details, comment)
By Annika Breidthardt
BERLIN, April 24 German firms shrugged off
concerns about tensions between the West and Russia over
Ukraine, helping the Ifo business climate index to a surprise
increase in April and signalling that Europe's largest economy
is on track for firm growth this year.
The Munich-based Ifo think tank's business climate index,
based on a monthly survey of some 7,000 firms, increased to
111.2 from an unrevised 110.7 in March.
Expectations in a Reuters poll of 40 economists had been for
a fall to 110.5 after the index slipped on Ukraine worries last
"Ukraine is still a factor but the positive general mood
prevails. The German economy is in very good shape," said Ifo
economist Klaus Wohlrabe. "The uncertainty seen in March has not
yet taken hold."
U.S. President Barack Obama said on Thursday that more
sanctions were "teed up" against Russia if it did not deliver on
promises in an agreement in Geneva last week to ease tensions in
Germany receives more than a third of its gas and oil from
Russia. More than 6,000 German firms are active there and
businesses have already warned that an escalation of the Ukraine
crisis would result in catastrophic losses for firms.
But having fallen last month, firms' expectations improved
in April as companies viewed the likelihood of an escalation as
limited. Their views on their current situation also inched up.
"The situation in eastern Ukraine remains volatile and
dangerous and poses the most serious risk to the euro zone
recovery at the moment," said Christian Schulz of Berenberg
"But German businesses seem to estimate that the worst-case
scenario of a war between Russia and Ukraine and escalating
sanctions all the way to disruptions of Russian energy supplies
to Europe remains unlikely."
So far the United States and European Union have imposed
visa bans and asset freezes on only a limited number of Russians
over Moscow's annexation of Crimea last month.
As long as the standoff does not turn into war, analysts
expect the German economy to grow nearly five times as fast this
year as in 2013, according to a Reuters poll this month.
They expect growth of 1.9 percent this year, just higher
than government projections for growth of 1.8 percent, supported
by relatively strong domestic demand and low unemployment. That
follows 0.4 percent expansion last year.
(Reporting by Berlin Newsroom; Editing by Madeline Chambers)