Draghi says Ukraine crisis a risk to the euro zone

FRANKFURT Thu Aug 7, 2014 9:10am EDT

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FRANKFURT Aug 7 (Reuters) - The crisis in Ukraine represents a risk to the euro zone economy, although the likely impact of European sanctions on Russia and retaliatory measures is uncertain, European Central Bank President Mario Draghi said on Thursday.

"Our risks to the recovery were on the downside to begin with, and certainly one of these risks would be the geopolitical developments," Draghi told a news conference after the ECB left interest rates unchanged at record lows.

The European Union has imposed sanctions targeting Russia's banking, defence and energy sectors because of Moscow's support for pro-Russian separatists in eastern Ukraine, while Russia has banned fruit and vegetable imports from the European Union.

Draghi said it was hard to assess the likely impact of a crisis at the beginning, adding that "if one looks at the figures for trade or financial flows, they would by and large reveal a picture of very limited interconnections". He said only a handful of major European financial institutions were especially exposed to Russia.

"However, it's very hard to assess what the actual impact is going to be once sanctions on one side and counter-sanctions on the other side are going to be undertaken," Draghi added.

(Writing by Paul Carrel; Editing by Catherine Evans)

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