Ukraine`s political crisis escalated sharply last week, with at least 70 people reported killed so far and hundreds injured in violent, often fiery battles between anti-government demonstrators and police in Kiev. The bloodbath brought mounting international pressure government to end the crisis. Violence Effects on Emerging Economies of Eastern Europe The sudden deterioration of violence on 18 February - by far the deadliest day since protests began - took markets by surprise last week, hitting emerging market stocks on the escalating conflict. Investors relapsing from the chaos sold assets across the region as the conflict spread in the nation, and crisis seeped into other markets. The Ukrainian Equities Index fell sharply last week and the hryvnia weakened sharply. Other markets from Hungary to Poland and Russia also suffered from the violence rocking Kiev, sending bond yields higher and currencies lower as the turbulence afflicting developing nations deepens. Why Is Ukraine In Turmoil? The stand-off, which has oscillated between calm and violence for months, escalated dramatically on 18 February, with protests breaking out after President Viktor Yanukovych`s government froze ties with the European Union in November 2013 in favor of a $15 billion bailout and stronger ties with Russia. Several developments - including violent police attacks on student protesters, severe new anti-protests laws, and the abduction and beating of opposition activists - have caused the demonstrations to spread and intensify. The protesters want Yanukovych out of office immediately and have sworn they will not leave the Independence Square, until he leaves the presidency. What Is At Stake? Europe's interest in Ukraine is primarily economic; where it sees the country as a rich market with industrial potential once it is properly supported and managed. However, the European Union (EU) insisted that Ukraine abide by high standards of democracy, human rights and economic transparency. At this point, European officials called for sanctions against Ukraine's government after the bloodiest clashes in a three-month standoff with activists in Kiev'sIndependence Square, and the U.S. government announced further followed suit with further penalties Default Risk Standard & Poor`s cut Ukraine sovereign rating for the second time in three weeks, citing political situation in the country that increased risk of default. S&P lowered its long-term foreign currency sovereign credit rating by one notch to `CCC` and gave it a negative outlook. Glimmer of Hope, Diplomatic Deal Was Reached A deal designed to end Ukraine's long-running crisis was reached Friday, after long negotiations that included European and Russian mediators. The compromise deal includes constitutional changes, formation of a new coalition government and bringing forward presidential elections by about three months to December 2014. The agreement was backed by all three opposition parties — the Ukrainian Democratic Alliance for Reform (UDAR), Fatherland and Svoboda. However, Thursday's resolution is likely to be challenged on the grounds that there wasn't a proper quorum, because many of Yanukovych's remaining loyalists stayed away, and it remains unclear, if Ukraine's military would accept to take up arms against protesters.