Kiev has accused pro-Russian rebels of opening fire with rockets and artillery at villages in southeastern Ukraine on Monday, all but burying a week-old European-brokered ceasefire deal.

The Ukrainian military said it could not pull weapons from the front as required under the tenuous truce, as long as its troops were still under attack.

The Ukrainian currency, nearly in freefall this month, fell a further 10 per cent on Monday on fears the truce could collapse.

The central bank said it would impose import curbs to sustain the hryvnia. The value of Ukrainian debt also fell, with bonds now trading at 40 cents on the dollar.

The reported shooting came closer to killing off the truce, intended to end fighting that has killed more than 5,600 people.

Strategic town

Rebels had already ignored the ceasefire last week to capture the strategic town of Debaltseve in what became a punishing defeat for Kiev.

Western countries still hope the truce can be salvaged if the rebels halt, having achieved that objective. But Germany, whose Chancellor Angela Merkel was the driving force behind the peace deal, said in unusually strong terms that it was now clear the ceasefire was not being implemented.

Kiev says it fears the rebels, backed by reinforcements of Russian troops, are planning to advance deeper into territory the Kremlin calls “New Russia”. Moscow denies aiding the rebels.

Fighting has diminished since Kiev’s forces abandoned Debaltseve in defeat last Wednesday, and there were hopeful signs for the truce over the weekend, with an overnight exchange of about 200 prisoners late on Saturday and an agreement on Sunday to begin pulling back artillery from the front.

But Kiev said on Monday that two of its soldiers had been killed and 10 wounded in overnight fighting, and that it could not start the artillery withdrawal if its troops were under attack.

“Given that the positions of Ukrainian servicemen continue to be shelled, there cannot yet be any talk of pulling back weapons,” spokesman Vladislav Seleznyov said.

Grad rockets

Dmytro Chaly, spokesman for the Ukrainian military in the port of Mariupol, which Kiev fears will be the next target, said rebels opened fire in the afternoon with Grad rockets, artillery and tanks on villages nearby.

Anatoly Stelmakh, another military spokesman, said rebel forces had attacked the village of Shyrokyne overnight.

“The fighters have not stopped their attempts to storm our positions in Shyrokyne, in the direction of Mariupol. At midnight armed groups again attempted unsuccessfully to attack our soldiers. The battle lasted half an hour.”

Rebel commander Eduard Basurin denied rebel fighters had launched any such attack, and said the situation was calm. “At the moment all is quiet, there is no shelling,” he told Reuters.

The ceasefire was negotiated at all-night talks on February 12th between the presidents of Russia and Ukraine, mediated by the leaders of Germany and France.

Ukraine, which is near bankruptcy and is dependent on a bailout from the IMF, will have trouble winning the confidence of international lenders unless the fighting stops.

If the ceasefire is recognised to be a failure, there will be strong pressure for tighter economic sanctions from Europe, and possibly for Washington to send weapons to aid Kiev.

‘Not satisfactory’

“When you look at the situation as a whole since leaders met in Minsk, it is clear the implementation of the measures is not satisfactory,” German government spokesman Steffen Seibert said.

“What is decisive is a comprehensive ceasefire. It is worrying for the German government that we haven’t seen anything like this yet.”

In the biggest rebel stronghold, Donetsk, occasional artillery fire could be heard through the night and on Monday morning, although it was not clear who was firing and it was far less intense than before the truce.

The separatist press service DAN reported two homes destroyed by shelling on the city’s outskirts overnight.

Nearly a million people have been driven from their homes by the war between pro-Moscow separatists in eastern Ukraine and government forces.

Last week’s ceasefire was reached after the rebels abandoned a previous truce to launch their advance, arguing that previous battle lines had left their civilians vulnerable to government shelling.

“I hope, I just hope, in the truce. No one knows what will happen with the way the sides are behaving,” said Donetsk resident Sergei (52).

Kiev says the rebels are reinforcing near Mariupol for a possible assault on the port, the biggest city in the two rebellious provinces still in government hands. Defence analyst Dmytro Tymchuk, who has close ties to the military, said rebels had brought 350 fighters and 20 armoured vehicles including six tanks to the area.

Kiev also fears unrest could spread to other parts of the mainly Russian-speaking east, where its troops are firmly in control and most residents are loyal, but violent separatist demonstrations have occasionally flared in the past year.

Two people were killed on Sunday in Kharkiv, 200km (125 miles) from the war zone, in a blast at a demonstration honouring the deaths of 100 protesters a year ago in an uprising that toppled the country’s pro-Moscow leader.

Kiev said it had arrested four suspects who had received weapons and instructions in Russia.

Reuters