When asked earlier this month about Russia’s economic hardships, Federal Reserve Chair Janet Yellen said she thought the spillovers to the United States through trade and financial channels would be “small.” Yellen’s assessment of the risks posed by Russia’s collapsing currency and likely recession contrasts with that of her counterpart to the north. Bank of Canada Governor Stephen Poloz told reporters on Dec. 11 that the situation in Eastern Europe is one of biggest threats facing the global economy in 2015. Poloz’s comments came before the ruble plunged 6 per cent on Dec. 16 even as Russia’s central bank raised its benchmark interest rate to 17 percent from 10.5 percent.
Canada and Russia aren't big trading partners. But Poloz was thinking about the situation on another level. He said he was worried about what an escalation of Russia’s conflict with Ukraine could mean for Europe. The continent’s stagnant economy can ill afford a shock of the type that could be delivered by Russia, whether by way of military aggression or economic collapse. There has been a tendency to play down the threat of contagion from Russia. That seems naive.
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