Event of the Year: Crisis
Having started overseas last August, the crisis reached Russia this autumn, and hit it much stronger. In the West, it took the crisis almost a year to move from the virtual economy and finances into production, whereas here it turned from a financial disaster into an economic one within a couple of months, paralysing entire industries.
Until recently, Prime Minister Vladimir Putin could not utter the word "crisis", instead replacing it with euphemisms like "difficulties", a "complicated period", or "repercussions of the global financial crisis". The iron and steel industry and major automakers have ground to a halt while listening to the reassuring speeches of the Prime Minister and his loyal cabinet.
Many experts predict that the situation will be much worse next year.
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Recipe of the Year: Let's fill it up with money
There is hardly a Government that would not find itself at a loss if the price of its main commodity fell more than threefold, and its banking system ground to a halt. Our Government House was gripped by panic and quickly turned into a centre of handing out loans, benefits, customs privileges, and promises.
When Boris Yeltsin was running for his second term, his subordinates put a map on the wall with lamps signaling crises in the regions. For the time being, our Government officials are doing without lamps but are being very active. They are setting up anti-crisis think tanks, checking on dismissals, and, more importantly, giving money. The Prime Minister said that nine trillion roubles (21.4% of the past year's GDP) have been reserved for the support of the banking system. Moreover, four trillion roubles have already been granted. Industry has about two trillion roubles "reserved". However, banks started taking roubles out of the national economy and turning them into dollars and Euros anyway they could. Putin threatened them with law-enforcement bodies, but no matter how hard the Government is trying to make the bankers give loans to the economy, few companies take them because the interest rates are too high.
Manual control of the economy reached its peak when Putin instructed to compile a list of companies that would enjoy government support (guarantees on credits, the government's investment into the companies' capital, and so on).
Under the plan, the companies are supposed to receive direct support. Putin spoke about 1,500 lucky ones, but the list somehow dwindled to 500, and the other day, it appeared that there are just 250 companies on the list.
Nobody knows whether or not this support will help. For example, nowadays nobody needs metal, so how can credits help metal-makers? Buying into the companies' stock could help transfer the external debt into the internal one, but in order to save enterprises, support should be comprehensive, to the whole of the technological chain, and there will not be enough money for that.
For the time being, the adopted measures have failed to produce any effect. The flow of capital registered in the first quarter of the year gave way to the opposite trend. In September, $24.6 billion left the country, and another $50 million followed suit in October.
One more measure - closing the borders for some commodities (foreign cars, chicken, pork, and agricultural equipment) - is not likely to change the situation for the better.
Out of all variants of easing the tax burden, the Government has chosen the least important - reduction of the profit tax. Now that many companies are dreaming of having even zero profit, they don't worry about this tax.
Economics department.
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Quotations of the Year:
Vladimir Putin said:
"As for the irresponsible conduct of business, I'll tell you straight - I'll force them to cough up their wealth and give it to the poor. Please tell this to all those concerned." This was said to the investors in the energy industry (June 18).
"We have a wonderful company - Mechel. Today, we invited its director, but he suddenly fell ill. I think he should get well as soon as possible, or else, we'll have to send him a doctor to mop up all these problems." Following this statement, the stock exchange collapsed for the first time (July 24).
"We are now wealthier than the Americans. They have become completely poor." Putin said this at a meeting of the ministers of the Shanghai Cooperation Organisation (SCO) on October 30.
Alexei Kudrin, Deputy Prime Minister and Finance Minister said:
On April 28, he told about petrodollars: "We cannot just waste all the money and then starve."
"I placed my bets on Russia in a game with the Netherlands and won a crate of champagne. Kostin (president of the VTB board - MK), with whom we watched the game, told me that my forecast was unlikely to come true, just like the forecast of inflation going down." He said this to high-ranking businessmen on May 25.
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