Russia sanctions to be lifted once Ukraine ceasefire is agreed, says Merkel

·         German Chancellor Angela Merkel has said Russian sanctions will be lifted once the country agrees to a ceasefire in Ukraine.

·         Merkel said such progress would be beneficial both to Russia's economy and several countries within the European Union, including Germany.

·         The Chancellor hit out at claims that Germany manipulates to euro in order to retain a trade surplus.

Sanctions on Russia will be lifted once Moscow agrees to bring an end to the conflict in Ukraine and no sooner, German Chancellor Angela Merkel said Tuesday.

The German leader said that the removal of sanctions would be economically beneficial to both Russia and Germany but insisted that Moscow would have to cease its imposition on Ukraine before these sanctions could be lifted and the advantages felt.

"Ukraine does not have full sovereignty," Merkel told reporters Tuesday at her annual summer news conference in Berlin.

Russia has been subject to sanctions from the European Union, the U.S. and several countries since 2014 when it backed pro-Russian and anti-government groups in the Donbass regions of eastern Ukraine, resulting in major conflict and the annexation of the Ukrainian territory of Crimea.

Merkel, along with France's leader, has since tried to convince Russia and Ukraine to implement a fragile ceasefire agreement under the 'Minsk' agreement but to little avail.

"I am working together with the French President and also with the help of the United States on finding solutions (for the Ukraine crisis) within the Normandy format," Merkel said.

On Monday, during a joint conference with French President Emmanuel Macron, Merkel called for Russia to do more to end the fighting between Ukrainian forces and Russian-backed separatists which has so far claimed more than 10,000 lives and remains an issue of tense conflict with Russian President Vladimir Putin.

"We just made clear in our joint statement released yesterday that the observance of the ceasefire agreement is of the utmost importance.

"If the Minsk agreement is kept, then the requirement will be met for lifting the sanctions on Russia," Merkel insisted, noting that the move would be "good for the Russian economy as well as good for the German economy."

The imposition of sanctions has badly hurt Russia's economy, as well as hitting a number of EU countries.

European Monetary Fund a 'very good idea'

Merkel also used the conference to outline her views on a several key political issues ahead of Germany's national elections in September when she hopes to secure her fourth term as Chancellor.

She showed support for her Finance minister Wolfgang Schaeuble and his hopes for a European Monetary Fund, describing it as a "very good idea." Schaeuble has proposed turning the euro zone's rescue fund known as the European Stability Mechanism (ESM) into a European Monetary Fund in a bid to better control the financial stability of the region. Schaeuble claims that such a fund would create more power for controlling national budgets.

"It could make us even more stable and allow us to show the world that we have all the mechanisms in our own portfolio of the euro zone to be able to react well to unexpected situations," she told reporters.

Following meetings yesterday with Macron, she also backed the French President's idea to have a common euro zone Finance minister, saying that it would allow for "better coordination on budget and economic policies."

Germany's trade surplus is not so dramatic

Merkel, meanwhile, denied claims by U.S. President Donald Trump that Germany has been manipulating in the euro in order to enjoy a significant trade surplus.

"I am not the one who decides on the euro exchange rate. If the euro zone is very low, then it is easier for German exporters to place their products on the global market – every change in the euro exchange rate has an impact on our ability to export and of course puts new pressure on our competitiveness.

"I personally don't see the trade surplus per se as so dramatic… and if the trade surplus goes down now, it is part of things that we don't have any influence on at all," Merkel insisted.

The euro has been trading higher against the dollar for the greater part of this year as the U.S. currency has suffered from a number of setbacks within the Trump administration. On Tuesday it passed $1.20 for the first time since January 2015.

Car emissions scandal a 'disappointment', more talks to come

Scandal within Germany's autos industry, one of the country's largest export sectors, has played heavily in Merkel's electoral bid this year, and she pledged on Tuesday to target manufacturers.

"There is a huge disappointment (in the auto industry), and this does not apply only to me, you can also see this among the people."

"There surely is a certain sense of fury," Merkel noted of the scandal, which saw a number of auto manufacturers cheat emissions tests.

She said that there would not be a return to "business as usual" for offending firms, pledging to hold more talks to govern the industry. However, she admitted that internal combustion engines, the traditional motor engines monitored in emissions tests, would remain a core part of the autos industry for decades to come, despite pushes to find greener alternatives.