German Chancellor Angela Merkel and French President Francois Hollande meet with Russia's Vladimir Putin in an attempt to move towards a peaceful solution in war-torn Ukraine, as debate over whether or not to arm Ukraine heats up. As Kirsty Basset reports, the latest diplomatic push comes as Ukraine's economic situation deteriorates even further.
A ceasefire, and the chance to get out. Some residents of eastern Ukraine evacuate their war-torn region, ravaged by a conflict between separatist rebels and government forces - which has seen more than 5,000 people killed. It's a moment of brief respite after days of escalating violence. German Chancellor Angela Merkel and French President Francois Hollande are leading the latest diplomatic push to end the fighting. (SOUNDBITE) (German) GERMAN CHANCELLOR, ANGELA MERKEL, SAYING: "We have decided to do all we can, through direct visits in Kiev and today in Moscow, to urge that the bloodshed is brought to an end as soon as possible, and secondly that the Minsk agreement is revitalised." Merkel says it's unclear as to whether the talks will achieve a ceasefire. Europe is keen for a diplomatic solution. The United States is too - but it's also debating whether or not to arm Ukraine. U.S. Vice President Joe Biden, in Brussels, alluded to the limits of diplomacy. (SOUNDBITE) (English) U.S. VICE PRESIDENT, JOE BIDEN, SAYING: "President Putin continues to call for new peace plans as his troops roll through the Ukrainian countryside." A ceasefire agreed in Minsk last year was meant to freeze the front line - but rebels have since made gains - and that's expected to be a key problem in peace talks. Jan Randolph is from IHS Global Insight. (SOUNDBITE) (English) IHS GLOBAL INSIGHT'S JAN RANDOLPH SAYING: "There's a real risk the escalation may move up a few gears if the Americans get involved by supplying arms. And I think Merkel and Hollande will make it clear to Putin that unless we go back to the Minsk agreement, there'll be a further escalation and that's not in Russia's interests." The prospect of further sanctions may not be in Russia's interests either. (SOUNDBITE) (English) IHS GLOBAL INSIGHT'S JAN RANDOLPH SAYING: "Russia itself is sliding into recession. Its foreign exchange reserves are draining. The Western banks are retreating from the country. Unemployment's going up. They're facing a credit crunch. The political situation is getting very heated." The conflict is also playing havoc with Ukraine's economy. Its currency lost nearly a third of its value, after the central bank stopped foreign currency auctions and raised interest rates to almost 20 per cent. The latest effort to avoid financial collapse, which remains a threat as long as fighting continues.