* European Investment Bank suspends work in Ukraine
* EBRD continues actions, scales back dealing with
* Economic outlook tough, cbank eyes softer monetary policy
(Adds EBRD reaction, economy details, adds dateline)
By Martin Santa and Marc Jones
BRUSSELS/LONDON Feb 19 The European Investment
Bank (EIB) said on Wednesday it had frozen its activities in
Ukraine after at least 26 people died in the worst violence
since the former Soviet republic gained independence.
The European Bank for Reconstruction and Development (EBRD),
the largest financial investor in Ukraine, said it had already
scaled back its dealings with Kiev but had not suspended
Ukraine has been gripped by renewed political turmoil since
November, when President Viktor Yanukovich spurned a trade pact
with the European Union and opted instead for closer economic
ties with former Soviet master Russia.
The EIB's recent activities in Ukraine include the extension
of a metro line, modernisation of air traffic control facilities
and a 220 million euro ($302.52 million)credit line designed to
finance small- and medium-scale projects.
"For the time being the situation is so cruel that it would
be politically the wrong signal, but also irresponsible
vis-a-vis the people we asked to do the job, to be active on
business in Ukraine," EIB President Werner Hoyer told a news
The EIB signed financing contracts with Ukraine between 2007
and 2013 totalling 2.149 billion euros.
The European Union, which controls the EIB, said earlier it
was moving to impose sanctions on officials who ordered the use
of force against Ukrainian protesters.
Hoyer said the bank had put its activities on hold and would
wait to see how the situation in Kiev developed.
"We are presently not active with further projects because
we need to know in what political environment we are going to be
able to move in the future," Hoyer said after presenting the
bank's 2013 results to media in Brussels.
"For the time being we do not negotiate. There was (a) plan
for exploring a couple of fields of investor activities, which
would require travel to Ukraine and I stopped that last night,"
PRIVATE SECTOR FOCUS
The EBRD's net investment in Ukraine reached 8.7 billion
euros by the end of the last year, in projects focused on a
stable and open banking system, modernisation of infrastructure
and promotion of sustainable and efficient energy use.
"We have not suspended our operations in Ukraine, however,
as of about three weeks ago, we are concentrating primarily on
the private sector," the spokesman for the EBRD said.
EIB's Hoyer said he would wait for an official response from
an extraordinary meeting of the European Union's foreign
ministers due on Thursday before deciding on further actions.
"I think it would be completely the wrong signal to appear
as being the ones who do business as usual in Ukraine while the
people on the streets of Kiev...are being slaughtered," he said.
Ukraine's economy, dominated by steel and grain exports, has
so far been protected from deeper disruption due to the
political turmoil thanks to receiving part of a $15 billion
bailout package from Russia, but the outlook remains tough.
Prior to Moscow's offer of aid, Kiev had been in prolonged
discussions with the International Monetary Fund over a new loan
program, after its prior $15-billion IMF loan lapsed in 2011
over Kiev's refusal to end costly energy subsidies.
Analysts polled by Reuters expected the GDP to shrink by 0.5
percent in 2013 after it grew 0.2 percent in 2012 and the
Ukraine's central bank said last month a softer monetary policy
was needed to try to kickstart growth.
Ukraine's hryvnia weakened to beyond 9 to the dollar on
Wednesday for the second time in February in the wake of the
deepening political crisis, with dealers saying a dimmed
political outlook was keeping the currency under pressure.
($1 = 0.7272 euros)
(Reporting by Martin Santa in Brussels and Marc Jones in
London; Editing by John Stonestreet)