Merkel says Ukraine crisis is hurting German economy

SANTIAGO DE COMPOSTELA Spain Mon Aug 25, 2014 6:49am EDT

Germany's Chancellor Angela Merkel looks on as Ukraine's President Petro Poroshenko gestures in Kiev August 23, 2014.  REUTERS/Gleb Garanich

Germany's Chancellor Angela Merkel looks on as Ukraine's President Petro Poroshenko gestures in Kiev August 23, 2014.

Credit: Reuters/Gleb Garanich

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SANTIAGO DE COMPOSTELA Spain (Reuters) - German Chancellor Angela Merkel said the crisis in Ukraine was taking its toll on Germany, Europe's largest economy, which suffered a surprise 0.2 percent contraction in the second quarter.

Merkel said an unusually mild winter, which brought forward the usual spring upturn, had played a role in the weak April-June reading but added that the Ukraine crisis was also hitting German growth.

"There are, however, some uncertainties - I don't want to conceal that - the whole Ukraine-Russia situation shows that we of course have a big interest in our international relations being constructive again," she said at a joint press conference with Spanish Prime Minister Mariano Rajoy.

"But I nonetheless expect that our overall annual growth rate will be good, if nothing dramatic happens."

The German government has forecast that the economy will grow by 1.8 percent this year.

(Reporting by Reuters TV in Spain and Noah Barkin in Berlin; Writing by Michelle Martin; Editing by Victoria Bryan)

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