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The EU's confusion about sanctions

  • Last night's European Council highlighted sharp divisions among leaders about whether and how to confront Vladimir Putin;
  • Matteo Renzi said there was absolutely no chance of any further sanctions, while Francois Hollande even talked about phasing out the current sanctions next year;
  • Federica Mogherini said a Russian bankruptcy was in nobody's interest;
  • the ruble stabilised after central bank intervention, but very high money market interest rates are pointing towards a looming banking crisis;
  • data show that loans by foreign banks collapsed to 14% of 2013 levels this year, and further falls are expected in 2015;
  • Paul Krugman notes that despite a low ratio of debt-to-GDP, Russia is vulnerable to a combined oil and forex crisis through its foreign debt exposure;
  • Marcel Fratzscher says that a Russian financial collapse is looking increasingly probable;

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