The ceasefire in Ukraine was on the brink of collapse on Wednesday as the battle for a transport hub came to a head, with the government withdrawing its forces after weeks of fighting to hold on to the strategic location.

The clash for Debaltseve, a key town on the road that connects Donetsk and Luhansk, is a “massive violation” of the truce reached last week, said German Chancellor Angela Merkel’s chief spokesman, Steffen Seibert. The European Union urged implementing the truce agreement within hours.

Hanging in the balance is the cease-fire struck last week in an effort to end almost a year of fighting that the United Nations estimates has killed more than 5,600 people and chilled Russia’s ties with the U.S. and Europe. Ukrainian Eurobonds and the hryvnia fell to a record as fighting was also reported near the key port of Mariupol.

“The signs that we’ve seen so far show that there seems to be very little chance of this agreement actually being fully implemented,” Amanda Paul, an analyst at the European Policy Centre in Brussels, said by phone. “The fact that you have ongoing violations on the ground, the ongoing fighting in key locations, doesn’t give much hope for implementation.”

Troops Evacuated

Ukraine has evacuated 80 percent of its forces from Debaltseve, President Petro Poroshenko said in Kiev on Wednesday before his departure for the conflict zone. The government wants to complete the withdrawal as soon as possible, according to Andriy Lysenko, a spokesman for the country’s military.

The army has “moved everything to a new defense line, setting a foothold to defend the country,” Poroshenko said.

The rebels said hundreds of Ukrainian soldiers were surrendering in Debaltseve, Tass news service reported Wednesday, citing Donetsk rebel official Maxim Leschenko. Nikolay Kolesnik, a commander of Ukrainian Krybas battalion, said for “sure” there were casualties in the town battle, according to a Facebook post on Wednesday.

“The German government strongly condemns the military actions of the separatists in Debaltseve,” Seibert said Wednesday. “This is a massive violation since the cease-fire that’s been in effect since Sunday. One has to say today that the assessment of the implementation has been sobering.”

Casualties

It was impossible to independently verify claims of troops surrendering or casualties. An unspecified number of Ukrainian soldiers, taken by the rebels as prisoners on Tuesday, still remain in captivity, Ilya Kyva, a deputy police chief of the Donetsk region, said by phone Wednesday.

Russian Foreign Minister Sergei Lavrov told reporters in Moscow that the battle shouldn’t be an excuse to undermine the cease-fire agreement.

Lavrov said hostilities had to be halted to calm down the situation in Debaltseve.

“I really expect that common sense will prevail” and the peace process will continue and the situation in the town “won’t be used as an excuse to undermine it, as happened before,” he told a conference in Moscow on Wednesday.

U.S. Vice President Joe Biden and Poroshenko agreed by phone that “if Russia continues to violate the Minsk agreements, including the most recent agreement signed on February 12, the costs to Russia will rise,” according to a White House statement on Tuesday.

Truce Threatened

With the truce under pressure, Ukraine’s allies have resumed discussions over forcing Russian President Vladimir Putin’s government to stop the conflict. The EU said Monday that work is “currently ongoing” on potential “further appropriate action” against Russia. Some U.S. politicians have called for supplying arms to Ukraine, which together with its allies says Russia supports the separatists with hardware, cash and troops. Russia denies that it’s involved.

Karl-Georg Wellmann, a lawmaker in Merkel’s Christian Democratic Union party and chairman of the German-Ukrainian parliamentary group, told newspaper Tagesspiegel that Germany won’t be able to halt U.S. weapons deliveries to Ukraine to fight Russian-supported separatists.

“We will no longer be able to stop weapons deliveries from the U.S. and Canada” after rebel gains in Debaltseve, he told the newspaper in an interview Wednesday. The German government’s opposition to arms deliveries hasn’t changed, Seibert said.

EU sanctions on Russia are linked to “the situation on the ground” in Ukraine, EU foreign policy chief Federica Mogherini said on Wednesday in Riga, Latvia.

‘Next Hours’

“If the situation on the ground follows the commitments taken in Minsk last week, obviously this would not be necessary,” Mogherini. “We have to see the implementation happening in these very next hours.”

The hryvnia slumped 2.6 percent to record 27.1 per dollar by 3:20 p.m. in Kiev. Benchmark sovereign notes due July 2017 slid 4.7 cents to all-time-low 48.7 cents on the dollar, lifting the yield to 46.7 percent. Investors holding Ukrainian debt have lost 12 percent this year, the most among 59 nations in the Bloomberg USD Emerging Market Sovereign Bond Index.

The Debaltseve situation creates an “additional momentum for the separatists to push further, to make more territorial gains,” Marcin Zaborowski, the head of the Warsaw-based Polish Institute of International Affairs, said by phone on Wednesday. “Once they’ve achieved victory, they have no incentive to stop.”

Zaborowski said it was crucial now to include the U.S. in the peace process.

“Minsk showed that having peace talks without the U.S. at the table is essentially worthless,” he said.