Last-ditch Ukraine truce bid

February 6, 2015

Members of the armed forces of the separatist self-proclaimed Donetsk People's Republic gather near a building destroyed during battles with the Ukrainian armed forces in Vuhlehirsk

After flying to Kiev to present a new peace plan, Germany’s Angela Merkel and France’s Francois Hollande will be in Moscow today for talks with Russia’s Vladimir Putin.

Ukraine’s troops are under the cosh from rebels in the east of the country, who the West says are openly supported by Russia.
The economy is teetering as evidenced by a collapse in the hryvnia currency yesterday despite a dramatic interest rate rise. Nearly bankrupt Kiev is trying to negotiate a bailout from the International Monetary Fund but the Fund may be unable to release money while there is no ceasefire in place.

U.S. Secretary of State John Kerry, also in Kiev on Thursday, said Barack Obama will decide soon whether to provide Ukraine with lethal weapons to fight separatists in east Ukraine, adding that Washington preferred a diplomatic solution. He will travel to the Munich Security Conference which gets underway today and continues over the weekend.

German and French officials have given few details of the substance of their new proposals. Kiev want all forces to return to lines agreed in a September truce. The rebels, who have advanced since then, want to keep their gains.

U.S. Vice President Joe Biden visits Brussels, meeting Commission President Jean-Claude Juncker and European Council President Donald Tusk.

Russian inflation hit 15 percent in January, underscoring the growing economic pain from sliding oil prices and Western sanctions. But that is not deterring Putin in Ukraine. The EU is preparing further sanctions, though they might not be imposed until March. But wrecking the Russian economy is not bringing Putin to the negotiating table.

After a rather bruising week touring EU capitals having their plan for a debt renegotiation firmly rebuffed, Greece’s new leaders must surely realize they will have to moderate demands made on the campaign trail before their Jan. 25 election victory. But they are not for folding yet.

On returning to Athens, Prime Minister Alexis Tsipras said: “Greece cannot be blackmailed because democracy in Europe cannot be blackmailed.”

There is economic logic in easing up on austerity to galvanise growth and thereby increase the tax base and cut debt but there is no question of writing off Greece’s foreign debts, which are overwhelmingly held by euro zone institutions and governments.
Greece could in the end be given more time to pay off its debt if it keeps its budget in balance and maintains promised reforms. Athens is tasked with running a hefty primary budget surplus and could be allowed to eat into that a little.

But Tsipras will have to settle for a lot less than the campaign slate he won the Jan. 25 election on. And to buy time, he may well have to drop his opposition to extending the bailout, though it could be called something else.

German industrial output, just out, edged up 0.1 percent in December, less than expected after industry orders for the same month went through the roof.

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