* Economy Minister Gabriel says no alternative to sanctions
* Cost of EU inaction against Russia would be much higher
* Sanctions will hurt German 2014 growth - economist
(Updates with more Gabriel quotes in paras 3,9)
By Erik Kirschbaum
BERLIN, Aug 3 Tough new economic sanctions
against Russia will hurt Germany's economy but they are
necessary for the sake of peace in Europe, Vice Chancellor
Sigmar Gabriel said in a television interview on Sunday.
The European Union imposed sanctions that took effect on
Friday targeting Russia's banking, defence and energy sectors
because of Moscow's support for pro-Russian separatist rebels
battling Kiev's forces in eastern Ukraine.
"We can't behave as if we're just a community of economic
interests, because we're a political union and have to do what
we can to ensure peace on this continent," said Gabriel, who is
also economy minister and head of the Social Democrats (SPD).
Germany, the EU's largest economy, has extensive trade ties
with Russia but Chancellor Angela Merkel became a firm advocate
of the tougher measures against Moscow after the downing of an
airliner last month over an area of eastern Ukraine controlled
by the rebels. All 298 people on board the plane were killed.
"What would happen if the European Union didn't react?"
Gabriel said in the ZDF TV interview, to be aired later on
Sunday, the 100th anniversary of Germany's declaring war on
France in 1914.
"If all the lessons learned in Europe are that someone can
start a civil war in a neighbouring country and nothing happens,
then that would cost a lot more than a few percentage points of
possible growth," he said.
Gabriel said in the interview that economic setbacks as a
result of the Ukraine crisis were unavoidable.
"There would be much, much greater negative consequences if
Europe did not act ... Where war and peace are at stake,
economic policies can't be the main concern," said Gabriel, who
has chaired recent cabinet meetings while Merkel is on holiday.
"We're going to have disadvantages in Europe, but not doing
anything would be much worse. That would mean it's possible to
play with fire in Europe, and you could invade a neighbour or
support civil wars next door ... Doing nothing is not something
we can do."
His comments came after the head of Germany's Ifo Institute,
a leading independent economic research group, said German
growth would shrink towards zero in the second quarter of 2014
from a healthy 0.8 percent in the first quarter, due in part to
the worsening Ukraine crisis and sanctions.
Ifo president Hans-Werner Sinn wrote a guest column for
Wirtschaftswoche magazine in which he said the worsening crisis
meant the previous forecast of 0.3 percent growth in the second
quarter from the first quarter would have to be revised lower.
Sinn's outlook contrasts with less gloomy forecasts from
other economists who have said even a complete collapse of
Russian-German trade would have only a limited impact. A recent
Hypovereinsbank research note said losses would be "manageable".
Germany had exports to Russia worth 36 billion euros ($48
billion) in 2013 - or 3 percent of all its exports. About 6,300
German companies, or 10 percent of exporters from Germany, have
sales to Russia.
Before the downing of Malaysian flight MH17 on July 17 by
what Western countries say was a Russia-supplied missile, German
industry had campaigned hard against Russian sanctions, warning
of lasting damage to domestic companies and the broader economy.
German business leaders had said a decline in German-Russian
trade was putting some 25,000 jobs in Germany at risk. Some
300,000 German jobs are dependent on trade with Russia, the
Committee on Eastern European Economic Relations says.
($1 = 0.7447 Euros)
(Editing by Gareth Jones and Jane Baird)