Working Day

27 february, 2009 13:00

Prime Minister Vladimir Putin met with the leaders of the United Russia Party

Prime Minister Vladimir Putin met with the leaders of the United Russia Party
"Our anti-crisis measures are being implemented. We have succeeded in maintaining stability in the banking system and have therefore created pre-requisites for once again issuing loans to domestic industries. Although such loans are still insufficient, this process is picking up momentum."
Vladimir Putin
Meeting with the leaders of the United Russia Party

Transcript of the meeting: 

Vladimir Putun: Good afternoon,

I propose that we exchange opinions on the socio-economic situation and our short-term tasks during this meeting.

It is clear that 2009 will be a difficult year. First of all, this concerns the real economy and labour market situation. We are closely following and analysing global economic processes. For better or for worse, we depend on them.

We have to say that the crisis is not over yet and has not even peaked. The efforts by the Governments of the most developed global economies have not yet produced any tangible results. This means that this situation may persist for a long time.

The scale of global economic disproportions is too great. Russia and its partners in the international community must accomplish a great deal in order to pave the way for a new recovery. This implies joint and individual efforts. National Governments, doubtless, assume great responsibility.

Our anti-crisis measures are being implemented. We have succeeded in maintaining stability in the banking system and have therefore created pre-requisites for once again issuing loans to domestic industries. Although such loans are still insufficient, this process is picking up momentum.

The oil, energy and transport sectors are posting a stable performance. Other economic sectors, including the iron-and-steel industry, are sending out positive signals and are also getting better.

I hope that carmakers, farming-machinery manufacturers, other engineering companies and all affiliated sectors will start experiencing the positive effects of state support in the near future.

I want to note that the United Russia parliamentary party has railroaded high priority anti-crisis legislation through the State Duma. Moreover, the Duma United Russia deputies have submitted many of these bills at the Government's request.

In March, all of us will have to make a responsible decision and approve a new version of the federal budget. As has already been said, there are no plans to reduce overall expenditure volumes. In fact, budgetary expenditure will increase by a small margin.

At the same time, considerable allocations must be re-channeled to anti-crisis measures, pensions, public-sector wages, other social commitments to the population and financial aid to Russian regions in line with inter-budgetary relations. State defence contracts and high-priority national projects will be funded ahead of schedule.

The concerned specialised departments and deputy groups will have to revise other budget expenditure items.

All of us realise that each budgetary item aims to solve specific problems. Consequently, we should not automatically cut back on spending. On the contrary, we must thoroughly assess all pros and cons of increasing or cutting various budgetary items. Nevertheless, we will have to separate high priority and less important projects in line with state priorities. I am sure that you will support this responsible approach, which is the only option in the current situation.

You and I are aware of and have repeatedly discussed education problems and the state of our schools. Here is just one example: Some Russian schools have not been repaired in the last 30 years. What does the crisis have to do with this? We are talking about a choice of priorities here. Some regions have simply decided that there are more important things. The choice of priorities is becoming a particularly important and sensitive issue at this time of crisis.

United Russia, which represents the interests of the majority, is called upon to implement the same line while amending the budgets of the Russian Federation's constituent and municipal entities. We must accomplish this objective in the most well thought-out and careful manner. We must not forget that an overwhelming majority of public-sector workers are employed at regional and municipal agencies. The very same budgets are a source of numerous social benefits. Such budgets must therefore be amended in such a way as to rule out any wage and benefit arrears in any, even the most unfavourable situation as regards revenues. I am also asking you to prioritise sufficient regional and local budgetary allocations for implementing employment programmes. This implies mandatory co-financing on the part of regions and additional measures that can be implemented by them.

Apart from budgetary amendments, other anti-crisis bills will be submitted during the State Duma's current parliamentary session. For instance, the Duma is now finishing voting a bill on the use of leasing operations during state purchases. When adopted, this bill will help fuel domestic demand for Russian industrial products.

The United Russia party maintains permanent contacts with trade unions, business communities and public organisations. Regional public reception offices are working actively. This is a very serious feedback channel allowing us to expose and analyse emerging problems and to prepare our own proposals on additional anti-crisis measures. Naturally, all of them must be duly coordinated with experts and specialised departments. I know that you have prepared the relevant proposals that will also be discussed today.

Moreover, let's think about using the party's intellectual potential for charting anti-crisis measures in regions and municipal entities. Naturally, the current economic situation requires maximum possible attention and efforts on our part. Nevertheless, we must not focus on the crisis alone. We must work comprehensively in order to modify national legislation and to exert long-term efforts.

I believe the State Duma and United Russia have recently accomplished a lot in this respect. I want to name just a few high priority legislative acts passed during the autumn parliamentary session and in early 2009. First of all, we have passed an extremely important bill on supporting small businesses and eliminating administrative barriers in the economy. After the law is enacted on July 1, 2009, the number of various checks and inspections hindering business operations will be drastically reduced. I think United Russia could actively oversee the implementation of this law and prevent unscrupulous officials from emasculating its principles.

A reduction in the number of checks will also save considerable budgetary funding. We annually spend a staggering 160 billion roubles on various checks at every department and in every area. This funding could be used far more effectively.

I am asking party bodies to prioritise the protection of small businesses from administrative pressure. The creation of jobs, their preservation and additional tax proceeds directly depend on the performance of small businesses. Last year, we passed legislation enabling private individuals to gain access to information about the work of state-power bodies, as well as legislation on federal universities, auditing activity and many others. The State Duma has already received governmental bills on upgrading anti-monopoly legislation and countering financial-market machinations. Please prioritise them.

We realise how important this is. Our laws in this sphere proved to be too liberal. Other developed economies have long envisaged criminal liability for such violations. Our efforts to support domestic industries, separate industries and companies will prove ineffective, unless they are backed by large-scale measures to develop the market infrastructure and to create a favourable business environment.

In conclusion, I want to once again stress that the party's prestige depends on effective law-making activities and its ability to explain the essence of specific decisions and the motives of such decisions in every particular situation to every person. We must also be convinced that we have chosen the right road and are implementing the right measures.

And now the last thing. As I have already said, the situation is difficult. Although this is going to a difficult year, there will be no catastrophe. We can control the situation, and will surely accomplish this objective. We will cope with all the problems. The quality of our work is the most important issue. It is fairly easy to disburse allocations when we have a lot of resources and funding at our disposal. However, it is another matter to work in conditions of crisis. This requires great responsibility before the nation, our citizens and the people, as well as high professionalism and an active political stand. We will succeed if we act in such a way. This is exactly how we are going to act.

This is what I wanted to say at the beginning. And I now give the floor to Boris Gryzlov.

Boris Gryzlov: Mr Putin, United Russia is doing everything it can to coordinate action by all branches of power and institutions of civil society. This is our task and we are carrying it out. I think that unity is more important now than ever before.

In February, the State Duma adopted a resolution by parliamentary majority on additional anti-crisis measures that we consider necessary.

At the same time, we decided to give an assignment to the Audit Chamber - notably, to draft a plan to check the expenditure of the federal funds channeled into the banking system and the real economy. We have proposed more than 50 systemic measures, but I believe that the main thing is to make sure that they all fall under Strategy-2020. We should by no means deviate from the plans for national strategic development, including a four-fold increase in labour productivity, longer life expectancy, and general improvement of our living standards. It goes without saying that we should fulfill these tasks.

As for this year, we realize that the Government cannot ignore any of its social commitments under the federal budget. All commitment must be honoured. This is our position.

In this context, I'd like to say that starting from its sixth congress in Krasnoyarsk in 2005, the party has approved investment projects to develop Siberia and the Far East, such as the construction of hydropower stations and railways. At our congress in Yekaterinburg in 2006, we approved the construction of fitness centers and the following projects: Historical Memory, Healthy Heart, Aircraft Industry, Industrial Urals-Polar Urals, Our Home, and Pure Water. Many of these party projects have become national programmes funded from the federal budget. Now that the budget is being adjusted, I'd like to discuss with you budget appropriations for these party projects this year, in 2010, and in 2011. We deem it necessary to continue them.

Recently, the State Duma adopted many laws to support the banking system, particular guarantees of deposits. In this way, the first stage of the crisis was overcome. Our citizens did not rush to take their money out of the banks. In December, they deposited more money in banks than in November. The law on deposit guarantees reassured 98% of savers who had less than 700,000 roubles in banks.

We adopted laws to support the real economy and to secure jobs, but we understand that the banking system also lives according to its own laws. The transfer of money into the domestic industries is being delayed. This is a fact. In January, production fell by 3.5%. For this reason, I'd also like to discuss the transfer of funds into the real economy. I consider this question to be very important. Most likely, it will require some adjustments to our legislation.

There is one more issue that I consider vital, notably, assignment of contracts in the public sector. Regrettably, in the defence industry, contracts will be awarded in the second quarter, whereas prepayment will be made in the third quarter, as we heard at a meeting of the State Council. I think that such delay is not simply inadmissible, but may cause the collapse of our defence industry. The problem of funding priority avenues should be resolved.

Now that we have a three-year budget, we could plan January and February expenditures in August and September of the previous year, though this is not done now. We are waiting for the Ministry of Finance to prepare provisions on this year's budget expenditures after all federal targeted investment programmes are approved. By its standards, this will happen in April or May. For this reason, conclusion of government contracts is postponed to the second quarter.

I think we should primarily approve the prepayment of defence contracts. We should do this immediately, today or tomorrow.

Mr Putin, I think that the small business issue that you raised is also very important. It can tangibly improve the situation - create new jobs, cover more areas, and attract resourceful people who are ready to work their fingers to the bone. In this context, I'd like to make more proposals on this issue and discuss them with you.

The law on tax audits will take effect next July. However, considering that this year is so complicated, I suggest imposing a moratorium on all check-ups of small business in 2009 except those dealing with life and health, such as food inspection.

I think we could consider postponing rental payments for a year. What do I mean by that? Small business is not receiving money from the banking system now. We could help it directly from the Federal Treasury. What if we pay for rent from the federal budget? It is the biggest expense for small companies. How can we do this? Usually, premises are rented from municipalities and regional divisions (regions and territories). We could make up for their lost revenues with federal budget funds. This would be a real help to small business. We suggest that this provision should also be introduced for one year.

Today, a limit of 20 million roubles allows small companies to use simplified taxation schemes. I think that in light of the current changes, in particular, the rouble's devaluation, this ceiling could be increased to 60 million roubles. This figure is realistic and justified.

I think we should consider licensing more spheres of business activity. This is also quite understandable.

Our meeting is being attended by Sergei Borisov, the head of the Organisation of Small and Medium-Sized Business OPORA Rossii, and by Alexander Shokhin. This is a very important matter. Industry performance during this year is one of the most important issues that we must discuss, because we have huge problems with loaning money to the real sector. I think we'll hear more questions on further changes in the banking system.

We have prepared a number of questions. I'd like the Chairman of the Duma Committee on Economic Policy and Entrepreneurship, Yevgeny Fedorov, to take the floor:

Vladimir Putin: Could I make a brief response to your speech?

I fully agree with Mr Gryzlov on the need to take measures on the defence industry. In fact, a relevant instruction has already been made. Money is already being transferred - 91% on R&D. As for the purchases of arms and repairs, the situation leaves much to be desired, though 45% are already there. It means that in general, we can raise it to 85%. The Minister of Defence has already been instructed on this matter. The work is underway. This is the first point.

Nonetheless, it goes without saying that for all this to be done in full we must make relevant decisions on the budget as soon as possible. This is the first point.

Secondly, the scale of expenditures on all ministries and departments is generally clear. The operating budget is functioning by law. We have adopted it. Therefore, ministries have an opportunity to define priorities and start financing what will have to be financed in any event. They know this and must do this. I fully agree with this.

Now allow me to say a few words about small- and medium-sized business. I think we'll hear more questions about it. I won't go into details right now. I'll just remind you that they receive 30 billion roubles through VEB. The budget allocates them half in different areas.

As for postponing rent, Mr Gryzlov said that it is part of regional budgets' revenues. If we want to reimburse them from the federal budget, we should simply calculate how much it will cost.

Remark: Does this information come from business?

Vladimir Putin: This is all business. The only difference is the sphere of responsibility. Your sphere is small and medium-sized business, and ours is defence and pensions. This is why we should simply count everything. The proposed budget provides for rather big expenditures on support of regional budgets. First of all, we should look there. We may consider adding more money but we should first calculate how much, although this is an intricate question. When we start discussing all items in detail, we'll understand that moving left or right is very difficult.

The idea about licensing is also correct but I'd like to remind you that the number of spheres of activity has already been raised from 61 to 69. We could consider adding more spheres.

Now a few words about check-ups. In general, I share Mr Gryzlov's view. I like this idea - to rid small business of check-ups for at least a year. The only obstacle is the quality of goods and services. We must protect our citizens against poor goods and services. Let's see what we can do. What we don't want is to hear our citizens say: "What a mess you have made!" Unfortunately, businessmen are not always responsible. What quality of goods will they offer? What services will they offer? Let's think about this. On the whole, we can talk it over.

Please Mr Fedorov, go ahead.

Yevgeny Fedorov: Mr. Putin, together with the Government we are actively involved in anti-crisis measures both in the State Duma and in the 27 government commissions that include State Duma deputies. Hence, the Government measures are our joint measures, we undoubtedly support them and are jointly responsible for them.

At the same time, during the course of this work we increasingly encounter issues that are to be tackled in the framework of Strategy-2020. In effect we are restricted by the rigid structure of the Russian economy, which is geared toward commodity production.

In fact, the system holds back the development of production with a high added value, and puts a curb on small business. In addition, to harness intellectual property to innovation, more market instruments and a corresponding status are needed, which is another problem for the innovative economy.

And yet we say at various levels that the crisis should serve as a remedy for our economy, a catalyst for its qualitative improvement, so that we emerge from the crisis renewed and effective. What specific measures can achieve that?

Vladimir Putin: We have discussed it many times. First of all, we are talking about federal targeted programmes, our priority national projects, and compliance with macroeconomic parameters.

I think it is clear to you (because you have dealt with economic issues for a long time) and to many players in the market (I think the representatives of business present here will comment on it) that after the Central Bank decided to change the exchange rate of the national currency against the two-currency basket, the mood of many of our enterprises has changed dramatically. That decision cut imports significantly and increased the demand for goods produced inside the Russian Federation.

All this, including our actions to support the banking system and normalize the situation there, should gradually create conditions for so-called "long money" in the Russian economy.

A situation in which we produce nothing but energy and chemicals and sell them, while buying everything that we consume abroad, is unacceptable. Yet several things are needed for the situation to change. What are they? Sticking to macro-economic parameters, financial discipline, diversifying of the economy, and accumulating reserves.

On the whole, in previous years we have worked consistently in each of these areas, and even in the crisis situation we have planned certain steps that will prevent us from deviating from our targets. Proceeding in this way, I think we can implement the strategy you have proposed; indeed, we have spelled it out in Strategy-2020.

Boris Gryzlov: Valentin Denisov, Chairman of the Agrarian Committee.

Valentin Denisov: Mr. Putin, the deputies, the relevant divisions of the Government, and scientists are closely studying the experience of foreign countries in combating the crisis. We have noticed that many countries seek to stimulate internal demand. That is relevant to Russia as well. In your opinion, what further instruments could be implemented to make this work more effective?

Vladimir Putin: In regards to the agro-industrial complex, I think you are well versed on the measures we take in this sector. First, we have increased the capitalization of Rosselkhozbank. Last year it was 30 billion and this year we added another 45 billion roubles, plus subordinated loans. Deputy Prime Minister Victor Zubkov reported yesterday that an agreement has been reached with banks not only on the earlier negotiated sums - more than 800 billion roubles of funding this year - but that they are ready to finance over 900 billion roubles.

As for stimulating demand for domestic products, we have passed decisions on support of leasing in agriculture and on interventions in the grain market. It is in fact a state order, and it supports demand. Substantial sums have been allocated for these purposes, as you know. In the customs and tariff sphere, we have limited the imports of so-called red meat, beef and pork. We have made decisions on poultry meat. What is important is that prices in the domestic market do not increase. We looked into this matter yesterday. We must proceed in such a way that our actions to protect the domestic producer match his capacity to deliver products to the domestic market, in order to prevent deficits and keep prices down. On the whole, we have succeeded thus far.

The price index in the period from January to mid-February of 2008 was 3.1 and this year it is 3.2, a slight increase of 0.1. On the whole, the situation in this area is under control. We will continue acting in this way.

By the way, you mentioned what other countries are doing. Yes, we have seen massive subsidies in the euro zone. But they are scaling them down; relevant decisions have been made. In the United States, the President has introduced a new budget that cuts subsidies for agriculture, for farmers, and the cuts are substantial. We are not doing that here. In fact, we are doing the opposite.

Yury Vasilyev: As you have said, the deputies from our party regularly meet with the common people, the workers, and the business community. I just returned from Kabardino-Balkaria, where I received people at our public reception office. One notes of late a characteristic and interesting trend: people do not just ask questions about their personal problems, but make suggestions as to how best to cope with the crisis and what measures to take. Mr Gryzlov mentioned it when he spoke about small business.

Lately, however, along with these questions, questions and doubts have been expressed as to whether or not the financial resources are reaching the real economy. The business community is wondering whether it was necessary to check the fall of the rouble, whether it would not have been better to let it tumble overnight so that the financial resources used to shore up the rouble could have been used to improve the economy and the social sphere. What is your opinion?

Vladimir Putin: You may have a point there. In fact, it makes sense in terms of economics. At the same time, I think that we acted in the only right way, and I will explain now why I think so.

Let us think back to 1998. That is exactly what was done then. That was how they acted in 1998. They let the national currency collapse overnight. What was the result? Let me remind you. In 1997 inflation stood at 11%, and after devaluation it jumped to 84%. It simply devalued all of people's savings in hard currency, and then in roubles. Real incomes dropped by 50%. Let me stress, by 50%. It was good for the export-oriented enterprises, as their economic situation immediately improved, but for millions of citizens it was a disaster. This undermined people's confidence in the government and its economic policy, and had a very adverse social and psychological effect. Our GDP dropped by more than 5%; it dropped by 5.2%. On the whole, I think the damage was severe.

What have we done this time around? Yes, we deliberately allowed people to make up their minds as to how to behave in the changing situation. You will remember that last October, there was a run on bank deposits, as people collectively withdrew a hefty 380 billion roubles from their bank accounts. The question of course arose about what to do: to change the rate of the national currency or to limit the amounts that could be withdrawn from deposits. I directed the Ministry of Finance and agreed with the Central Bank that we would allow people to draw as much money as they wanted, since it was their money and they had the right to do it. And I must say that this move had a positive effect. The run on the deposits stopped, and we are now seeing the reverse happening, as money is coming back into the bank accounts as a result of people's confidence in the stability of the country's banking system. This is my first point.

Now for my second point: negative economic phenomena due to the untimely adjustment of the rate of the national currency. In expectation of that adjustment - and it was evident that it would happen because of the drop in oil prices - businesspeople and individuals began converting roubles into foreign currency (dollars and euros), thus sweeping 130 billion dollars out of our market.

There, too, it was a trade-off. I repeat, we had to either let the national currency fall with all the negative consequences I have mentioned, especially for citizens, or to deliberately dip into part of the national reserves and ease into the new situation. This latter scenario is essentially what we have done. After a smooth adjustment, the situation changed: as I said, the export-oriented enterprises breathed more freely and the macroeconomic situation in the country began to change smoothly. It enabled all the players to get their bearings in the new situation. We have promised our people that we will prevent economic shocks. I think we are obliged to keep our promise.

And my last point: more could have been done. Many say that we could and should have restricted the movement of capital and currencies. Theoretically, it is possible, but it would mean setting aside our ambitious plans to turn the rouble into the regional reserve currency, if only on the territory of the former Soviet Union. The yuan is not a bad currency, but it is not convertible and does not leave the country, or when it does, it does so under a special procedure.

As of July 2007, we decided to lift all restrictions on the movement of capital and today the rouble is in fact a convertible currency. This is a fact. In terms of non-cash transactions, it is emerging as a regional reserve currency. This is a big strategic plus for our economy, for strengthening it. So, that too was a conscious decision.

Yury Lipatov: In the run-up to the municipal elections due to be held in the Russian regions, we held many meetings with our voters, including pensioners.

We deputies believe that one of the government's main tasks is to protect the pensioners against inflation.

What possibilities do you see for maintaining and even raising the level of pensions, given the limited revenues of the federal budget and the Pension Fund?

And another question that, in some way or another, affects all levels of society: Is the state really capable of meeting the social obligations it assumed in 2009?

You have spoken about it more than once, but we would like you to say it at this particular meeting with the State Duma deputies. Thank you.

Vladimir Putin: You have asked a very important and sensitive question there. I have just been speaking about deposits and I said that our main task was, while supporting the banking system, to secure the interests of Russian citizens, the depositors in our banks. However, when I said that we would issue as much money as the people wanted, we did not do it thoughtlessly.

We crunched the numbers: the total amount of money in bank deposits here is 5.9 trillion roubles. Of these 30 largest banks, the hold is 4.5 trillion. Sberbank holds the lion's share. We know what happened in similar situations in other countries and how much money was withdrawn at the peak of the panic. We have calculated that we would have enough money in any case, which is why we have behaved so boldly.

But why could we afford to act the way we did? Because of the accumulated reserves. The same holds true for social benefits, pensions, and allowances. I have repeatedly said that we must meet, and we will meet, our obligations all the way. We have grounds for saying it, although other countries do not do it.

You will have heard that Ireland, for example, has initiated a pension reform that will increase deductions from wages going toward the accumulated part of the pension. People had not been warned about it. That of course is a heavy burden that spells social change. What do we do here? We are also increasing the accumulated part of the pension, but how do we go about it? It is absolutely voluntary. If a person wants to contribute an extra rouble, we match that contribution with government money. We will preserve that system, and will support those who want to increase the accumulated part, co-financing, and voluntary participation in the program.

Secondly, in regards to pensions in general: in 2009, we plan to raise pensions three times: on March 1, April 1, and December 1. In March and December, we will raise the basic part of the pension and in April, the insurance part. In March, the rise will be by 8.7%, as planned. As of April 1, we will raise pensions not by a little over 15% as planned, but by 17.5%, given the performance of the Pension Fund.

This is our response to the economic recession and the eventual inflation spurt. It is an actual rise, however small it might be. It is our response to the situation in support of pensioners.

We are anticipating 13% inflation, as you will see in the budget. If the forecast is wrong, the budget will envisage indexation beginning August 1, considering inflation. We must have the necessary money. You were quite right that this was the occasion to talk about it.

The pension system will shift to a new arrangement by December 1, 2009 to make the social pension no less than the minimum subsistence income. We have planned a 26.5% increase, if I am not mistaken. Still, I repeat: if the inflation exceeds our expectations, we must earmark a budget sum to make good on our pledge to the population. Indexation might reach 30%. This, too, must be earmarked in the budget. The Government will advance relevant initiatives.

Yury Lipatov: Thank you for your explicit and detailed reply.

Vladimir Putin: As for other social obligations, we continue to be very responsible about them even compared to the developed economies.

The European Central Bank President has appealed to all governments in the euro zone to restrain wages in the public sector. Here is a quotation: "National authorities should pursue courageous policies of spending restraint, especially in the case of public wages."

Late in December, the Lithuanian Government approved the proposal to increase the profit taxation rate from 15% to 20% and abolish privileges concerning credit institutions, the Central Bank, and farms.

VAT has gone up in Lithuania, as of January 1, from 5% to 19% on medicines, meat, fish, fruit and vegetables. Diesel fuel, alcoholic beverages, and cigarette excises have also increased. This translates into immediate price rises, as you understand.

Estonia has determined to raise pensions by a mere 5%, instead of the 15% promised for April.

We intend to stay true to our previous pledges and even increase them if need be, while they are planning to cut them by 10%. Cutting the payroll by 10% in all state agencies will be one of the biggest moves, while we increased the state payroll by 30% for this year in December 2008.

Latvia increased fuel, alcoholic beverage, and cigarette excises on January 1. Britain is planning to increase taxation starting March 1, and raise it by 2% every year. Belarus intended to raise the first-class base pay by 23%, as of November 1, and later de facto abolished the decision under IMF pressure because it needed a loan. This was a forced measure, and it was correct, economically speaking. Still, it was painful. The Bulgarian Government has frozen public wages on the recommendation of the European Commission. South Korea determined in November 2008 to freeze this year's wages in government agencies and industries. The Chinese Labour Ministry recommended to local governments at the end of last year to hold off on raising minimum wages and to cut the rate of health and injury insurance. The Canadian Minister of Finance addressed Parliament on February 18 on public wage freezes, and so on, and so forth.

I repeat, as we stay true on our social pledges concerning pensions, grants, and wages, we should pay the closest possible attention to all state expenditures, so as to optimise them and channel them into top priorities. In doing so, macroeconomic indices should not fall by any means.

Boris Gryzlov: Mr Isayev has the floor.

Andrei Isayev: Mr Putin, unemployment is perhaps the most sensitive crisis-bred problem. Russia, like many other countries of the world, sees plants closing and staffs reduced and shifted to part-time or mandatory leaves. The Government and the State Duma are making steps together to improve the situation. We have urgently approved budget and Employment Law amendments to make sizeable target allocations. The public stays uneasy, however-mainly the most vulnerable population groups.
Several hundred thousand young specialists will graduate from universities and technical schools this year. It will be awkward and downright dangerous if they start by lining up at employment office instead of getting their first jobs. The United Russia's Young Guard has drafted a law on first jobs, which proposes young specialist employment quotas. I know the Ministry of Economic Development has always been very cautious about employment quotas, citing the potential burden on enterprise. Still, such quotas might be introduced at state municipal offices and companies with municipal state capital or working on municipal government contracts.

Ability employment quotas demand special discussion, as the present-day quota is not complied with despite that fact that it concerns 12 million people who are very hard-pressed to find employment in the present situation.

Towns built around a major industrial plant are their own separate topic. Personnel reduction in such towns presents a great problem, as it implies relocation and the search for a new job.

Mr Putin, do you think we have a strategy to curb unemployment and, more importantly, prevent lasting unemployment?

Vladimir Putin: I will be frank. We have been having bitter arguments on this theme in the Government. Which is better-to stick to planned expenditures or increase anti-crisis spending to fight unemployment, etc? We would like to do both, but I referred to responsible economic policies at the start. We have to preserve macroeconomics. We cannot afford to bloat the budget deficit.

We have to amend the Budget Code. I'll return to it later. It envisages a mere 1% deficit, but we will surely have more-not like what the United States has, with 12.5%, but certainly more than 1%. Thankfully, we have the Reserve Fund to cover the deficit. The matter demands the utmost accuracy to focus on top priorities, lest we squander money.

What do we need to fight unemployment? We should support industry, so we will do our best to go on with the basic programmes we have. As we discuss the budget, we will get back to federal target programmes and the Investment Fund, among other themes, because the best thing to do is not to cut employment in development-oriented spheres and siphon people into public works with picks and shovels.

At the same time, we have to acknowledge that we cannot do anything effective in certain fields-the steel industry, for instance. I have quoted it as an example before. We largely oriented it on exports. Now, the foreign market has shrunken, and there is redundant supply. As for the Reserve Fund, it cannot cope with such an amount. It does us no good to pile up plate slabs until they reach the sky.

The external markets have shrunken or even closed. Other countries, too, have to cut production and employment along with it. In this situation, it is up to us to give people in their plight a helping hand.

As you know, we have increased unemployment grants. All told, federal and regional allocations on employment programmes total slightly below 44 billion roubles, with regional contribution as a proviso. The job has been done in more than 70 constituent entities, and programmes have been offered. 44 of them have been considered and several dozen approved. The regions are practical enough about it-they propose personnel training, migrations to get new jobs, and some other things. These programmes are realistic enough, and some of them are working already. Nothing matters more, however, than preserving the economic output.

As for your other question, about young specialists and their employment as a burden on enterprise, what we need is merely to thoroughly ponder practical patterns. Everything is possible as a matter of principle, though it is not simple in the given market situation. We must think it over carefully. A discussion is possible if you have something to propose.

Martin Shakkum: Mr Putin, bankers have received unprecedented support. It is timely and will have a significant impact. There is another problem, however, about which nothing is done-or at least not enough. By this, I mean industrial and private loans.

We can only regret that banks prefer to play the market now. Don't forget that another wave of the crisis will strike unless we increase bank liquidity and promote consumer demands. What is the Government planning to do? And do you intend to guarantee loans to key industries, at least partly, and limit interest on government-guaranteed loans?

Another question concerns the Central Bank.

Mr Putin, as we see it, the bank should become more efficient. It is up to the Central Bank to curb profiteering. We think it is high time to cut its personnel and reduce the number of its territorial offices to seven-the number of its authorised agents. The Moscow city and regional offices have merged into one, which is now working to greater effect, even with a sizeable personnel reduction. I think it would be worthwhile to eventually make the Central Bank a commission centre and banking inspection agency. That's what the Law on the Central Bank says. We have long been talking about it, and about merging the Banking Supervision Committee with the Welfare Payment Centre. The resulting institutions would be more compact and manageable-and much more effective.

What do you think about it?

Vladimir Putin: First, as for the construction and other industries, we have been rather tough in our dialogue with bankers due to the need for quicker growth of industrial crediting. At the same time, I would like to come back to what I said at the start.

There was a 380 billion rouble outflow from banks, after which 130 billion was converted into currency-thus, it was not a mere outflow, for the most part, but a transfer into dollars. On the whole, we understand the bankers' point. They wanted a safety belt in the situation. Now, the rouble rate is down a bit-35 roubles to the dollar. It is also down in comparison to the two-currency basket. Plenty of dollars have been stocked up, but we need roubles to live on. To resolve this issue, the reverse process is now taking place: currency is being exchanged into roubles, little by little. Thus, it appears that the Central Bank has chosen a correct and accurate policy. I believe it to be justified, balanced, and effective.

Now let us turn to particular economic branches. As you know, we have drafted an agricultural support programme. My colleague is familiar with it, I am sure. It involves big money. The crux of the issue, however, does not lie only in our capitalisation of Rosselkhozbank and the farm credits we have secured, for which we are subsidising 80% of bank interest, as opposed to one-third. This is significant practical support of the entire agrarian sector. We have made a decision on farm loans-not only to increase their capitalisation by 25 billion, but also to limit imports of farm machines that are not manufactured in Russia. This is tangible support.

The state cannot afford to keep the entire economy afloat out of its own purse. This is especially true of the export-oriented economy, whose partners are cutting imports. Such support would be a big blunder because we would not be able to cope with our social pledges, about which another colleague has asked, where both pensions and wages are concerned. The money would be squandered to no effect.

Still, there are spheres either directly linked with the state or dependent on it. The point refers primarily to the military-industrial complex, strategic industries, and town-forming enterprises.

We have established relevant tools to support them. Two new commissions have appeared. The Ministry of Finance will take care of strategic companies in the military-industrial complex. Minister of Finance Kudrin told me yesterday how many enterprises had come through the commission. Allocations have exceeded 50 billion roubles. In every instance, the commission analyses the state of the company and decides whether or not to increase its capitalisation, or whether the state should acquire a block, as we have done with MIG, or again, provide government guarantees, which also work as money since the budget takes them into account.

The Strategic Enterprise Commission deals with several hundred companies that have no direct bearing on the military-industrial complex. Last but not least is construction. It would be good to do something more for it. The central question is whether we can afford it without bloating the budget deficit. I think it is possible-when we start counting, you will see it does not require large sums.

We have not given up earlier announced construction programmes. Work on the Housing Programme is underway. Relevant allocations amounted to 75 billion rouble, if I am not mistaken. We have cut it by 15 billion but are adding another 40 billion out of the Housing and Public Utilities Fund, which we earlier intended to use up in 2010-2011. It's forty billion, just think! We are also working to extend government contracts with the Defence Ministry and for population groups whose accommodation is the duty of the state. We will do it all. As for extra measures, they demand further study.

As for the Central Bank, it is independent of the state, as in all economies of the world. You know it, and that is how it should be. The State Bank, Central Bank or the Federal Reserve System, as in the United States, should not depend on the political situation-its decisions are too responsible for that. It should not be connected with pre-election campaigns in the regions and nationwide-or we might get too far and ruin our economy.

As I see it, what the Central Bank has done up to this point is justified and effective. As I said in the beginning, it has met us halfway in increasing Sberbank capitalisation by 500 billion roubles. It no longer lacks any resources. The Central Bank is in contact with Sberbank, and its largest holder. However, Central Bank President Sergei Ignatyev says that it is willing to give further support if need be. It is not necessary now, but the decision shows great responsibility. The Central Bank is not anything like a mint but is rather an essential macroeconomic lever.

Monitoring inflation and total money in the economy is among the principal duties of the Central Bank. It has coped so far, on the whole. The presence or absence of long-term money does not depend on it-there are no civilised countries in which the Central Bank credits the economy. It should regulate macroeconomic indices, and our Central Bank is up to the task.

As for supervision, the Central Bank really has this duty. I think your proposal deserves to be discussed in due time. Let us think it over all together, like the Central Bank structure and personnel. I don't think it would be bad to merge territorial offices. On the contrary, it might be an improvement.

Last but not least, the Central Bank has its drawbacks, as with any other bureaucratic institution. Banking consolidation could be timelier, as could responses to developments in the currency market. More could be done for enlargement and supervision. All these were deserved reprimands.

Thank you.

Andrei Vorobyev: Mr Putin, the crisis is affecting the whole world, and Russia is no exception. The opposition and other radical groups are becoming more active. It would be good for our opposition parties to propose well-grounded and constructive ideas. Their discussions would help to solve the problems that concern millions.

All too often, however, they are led by sheer emotion, as they hold street actions with over-strung pickets and unsubstantiated slogans. We think all this is dangerous at a time when Russia needs unity more than ever.

The situation compelled us [the United Russia party-Ed.] to arrange mass actions in more than a hundred cities in 56 regions on January 31. We came into city squares to announce what had been done for education and to protect pensioners, what decisions the party congress and later the Government and the Duma had made to promote small and medium-size enterprise, and what fiscal privileges were available. In short, we described the entire anti-crisis package.

What do you think about this and similar actions?

Vladimir Putin: I don't think the situation will take an unexpected turn. Even in years of economic prosperity and social well-being, there will be those who point out the errors of leaders, ruling parties, governments, and presidents. That's what democracy is about. Churchill said once: "It has been said that democracy is the worst form of government except all the others that have been tried." It is hard to find an objection to that.

All political forces are even more anxious to make a name for themselves during a crisis, especially as it gives more grounds for criticism. This is a good thing when critics are law-abiding and comply with the Constitution and acts based on it. Now, when action-I cannot call it political-trespasses the law, it certainly means not to improve people's life but instead to help its instigators achieve their ends, promote themselves, and profit from problems. If they violate the law in that, the state and the public have the right to respond accordingly. We cannot afford to tolerate situations like those we have seen in certain countries, which I prefer not to specify.

Our political forces-I mean legal forces-have been extremely responsible up to this point, and I expect them to continue thus in the future. We cannot, must not, and will not limit legal protest - that is, in the forms stipulated by the law of the Russian Federation.