The main impact of European Union sanctions against Russia is likely to show in the energy sector but the effects can be contained and the EU is already discussing ways to support its companies through subsidies and loans, a top EU official said.
"The sanctions will have an immediate impact on our economy. It is difficult to quantify this impact as the situation is unfolding fast. There are many unknowns," European Commission Vice President Valdis Dombrovskis said.
"Growth will be affected. We will see an impact on energy prices and supply chains, including for raw materials. Confidence will be knocked. There will also be direct fiscal costs," he told a news conference after a meeting of finance ministers.
He said the Commission estimated the direct impact on the EU-wide financial system would be "contained" as the overall direct exposure of the EU financial sector to Russia was limited.
"But we are more exposed when it comes to energy. We expect gas and electricity prices to remain high this year. The overall impact on inflation and the economy is significant and is not expected to abate soon. So we will be in a high price and high inflation environment longer than we originally thought," he said.
Dombrovskis said that there would also be immediate costs for budgets of EU governments because of economic and material support to Ukraine, help for a large number of refugees and our the EU's continued support to the economy to deal with high energy prices.
(Reporting by Jan Strupczewski; Editing by Alistair Bell)
