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Risks rise on Ukraine ceasefire tension

Monday, November 10, 2014 - 02:17

Russia's central bank says it expects zero economic growth in 2015 and only 0.1 percent growth in 2016. As Joel Flynn reports, the strategy anticipates Western sanctions against Russia will remain until the end of 2017, more possible as Ukraine's ceasefire reaches breaking point.

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For two months the ceasefire in eastern Ukraine has officially held. But shellings like this one overnight at a Kharkiv cafe have been fairly common. It's now feared the truce with pro-Russian separatists is on the brink of collapse. That's a worry for Europe - says Simon Derrick from Bank of New York Mellon SOUNDBITE: Bank of New York Mellon Analyst, Simon Derrick, saying (English): "If we start to see a deterioration in the situation in Ukraine, that once again will start a fairly direct impact on local markets in eastern Europe, and that in turn will feed through into Europe, and I think in particular, the euro." It also adds to rising risk in Russia - growing tension not what the country's central bank needed in the same week it let the rouble float freely for the first time. That, along with plunging oil prices and western sanctions, has caused the currency to slump nearly 30 percent against the dollar this year. Russian President Vladimir Putin, though, isn't worried. SOUNDBITE: Russian President, Vladimir Putin, saying (Russian): "These events in the currency market which we see now in Russia are not at all connected to the fundamental economic reasons and factors, and all of it will come to an appropriate balance." But his words may not reassure traders. Forward guidance issued by the central bank said growth could remain effectively at zero for the next couple of years. That's on top of a prediction that sanctions could continue until 2017. Ian Stannard is from Morgan Stanley. SOUNDBITE: Morgan Stanley FX Analyst, Ian Stannard, saying (English): "I think if we start to see a rise in those geopolitical tensions then I think that will add to the current pressures and challenges to risk globally, so not only do we have global economics and monetary policy in many cases now working against many countries and currencies particularly within Europe, geopolitical pressures could also add to that as well." So the prospect of Ukraine's troops engaging once again in full-scale conflict is sending a chill through Europe and beyond. Twenty five years after the collapse of the Berlin Wall, one new report even suggests close military encounters between Russia and the West - are back at "Cold War levels".

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Risks rise on Ukraine ceasefire tension

Monday, November 10, 2014 - 02:17