European sanctions condemn Russia into recession

The potential impact of the new generation of EU sanctions against Moscow for its role in the Ukraine crisis is devastating. Brussels estimates that the Russian economy will suffer a sensational wallop of 1.5 points of GDP this year and 4.8 points in 2015, according to estimates by the European Commission. That would put the country into a deep recession and so far this year, both by capital flight, which on Friday forced the Russian central bank to impose a further rise in interest rates, to the 8% – for the sharp declines in the stock market from 7 % so far this year. Russia’s trade with Europe also back to double digits, and the ruble is down 6% against the dollar in 2014.

The obsession of Berlin and other European capitals is that the escalation of sanctions may have reverse if Moscow cut the tension in Ukraine. But the very short term it is likely the opposite: Twenty-eight will approve next week a further package of measures, and all analysts expect a withering response from Russia which could lead to a dangerous trade war for the international economy, amid a fuzzy retrieval.

The EU is preparing to declare an arms embargo, stop supplying civilian and military use and abandon the sale of key technologies for sectors such as energy. But the more effective financial – sanctions passed by preventing access of Russian public banks to the European capital as US- made, with significant economic consequences. Not only in Russia: the European economy, which flirts with deflation, will also suffer a great time. Brussels estimates that the impact on the EU side will be 0.3 percentage points of GDP in 2014 and 0.4 points in 2015. Not enough to fall into a third recession. But it will cause even more nebulous exit tunnel. Therefore, several countries called on Friday to the European Commission to implement a more flexible fiscal rules this year and next, according to sources, in view of the unexpected impact of the crisis with Russia in the European economy due to sanctions. France and Italy are asking for something for weeks for other reasons.

Even the most reluctant countries (Italy, Spain and especially Germany) have shown cracks in recent days regarding the new round of sanctions against Russia, after the incident Malaysia Airlines plane in which 298 people died.

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Posted by Maleeha Tareen on Jul 26 2014. Filed under Europe. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.