Showing posts with label Crisis. Show all posts
Showing posts with label Crisis. Show all posts
Tuesday, 3 March 2009
Ukraine Teeters On The Brink
Ukraine, once a worldwide symbol of an emerging, free-market democracy, is teetering. And its predicament poses a real threat for European economies and other former Soviet republics.The sudden, violent protests that have erupted elsewhere in Eastern Europe seem imminent. Across Kiev last week, people spoke of rising anger about the crisis and resentment toward a government that they said was more preoccupied with squabbling than with rallying the country.The sign held by Vasily Kirilyuk, an unemployed plumber at a recent protest, summed up the pervasive frustration: "Get rid of them all," it said."There will be a revolt," he said. "And people will come because they are just fed up."Kirilyuk, 29, was standing in the same central square where throngs in 2004 carried out the Orange Revolution, a seminal event that brought to power a pro-Western government in Ukraine. He said he was a fervent supporter then, but now he and a few dozen others who have set up tents are demanding that the heroes of that revolution step down.It is not hard to understand why world leaders are increasingly worried about the discontent and the financial crisis in Ukraine, which has 46 million people and a strategic location. A small country like Latvia is one thing, but a collapse in Ukraine could wreck what little investor confidence is left in Eastern Europe.It also could cause neighboring Russia, which has close ties to eastern and southern Ukraine, to try to inject itself into the country's affairs. The Kremlin also would be able to hold up Ukraine as an example of what happens when former Soviet republics follow a Western model of free-market democracy."Ukraine is a linchpin for stability in Europe," said Olexiy Haran, a professor of comparative politics at Kiev Mohyla University. "It is a key player between the expanding European Union and Russia."That Ukraine can cause problems for Europe was highlighted in January when Ukraine engaged in a dispute with Russia over how much it would pay Russia to use natural gas, as well as transport it to the rest of Europe. The Kremlin shut off the gas for several days, and some European countries went without heat.The crisis also has cut deeply because people are disillusioned with the government. President Viktor Yushchenko, a leader of the Orange Revolution, is widely scorned. A recent poll found that 57 percent of people want him to resign.His rivals have also lost popularity, as the public has become exasperated by years of bickering. In February, the International Monetary Fund refused to release the next installment of a $16.4 billion rescue loan because the government would not adhere to an earlier agreement to pare its budget.The monetary fund is projecting Ukraine's economy will shrink by 6 percent this year, but said it was continuing to work with the government to find a way to disburse the rest of the rescue loan.
Wednesday, 18 February 2009
Poll: Yushchenko, Tymoshenko Are Main Culprits Of Crisis In Ukraine
KIEV, Ukraine -- The majority of Ukrainians think that Ukrainian President Viktor Yushchenko and Ukrainian Prime Minister Yulia Tymoshenko are the main culprits of the crisis in the country, a poll conducted amongst 800 respondents by IFAK Ukraine on February 5 - 15 showed.
Some 54 percent of respondents think that Yushchenko is to be blamed for the crisis, while 44 percent think that it was Tymoshenko's fault.A total of 20 percent view the Verkhovna Rada as the one responsible for the situation. Just 11 percent accuse the National Bank, while 8 percent prefer to blame large business.Some 64 percent of respondents are ready to take part in peaceful protests actions, including rallies, pickets, and strikes.Some 37 percent rely on themselves in overcoming the crisis.
Ex-President Kravchuk: Snap Elections Will Not Help Ukraine Find Way Out Of Crisis
KIEV, Ukraine -- First Ukrainian President Leonid Kravchuk has said that it is necessary to amend Ukraine's electoral law before holding snap parliamentary and presidential elections, as a means of bringing the country out of the crisis.
"Snap elections are unnecessary. The recent [snap parliamentary] elections [of 2007] were unfruitful. It is necessary to amend electoral law to hold the elections," the Korrespondent magazine quoted him as answering questions from visitors to the Korrespondent web site.Kravchuk criticized the current system of closed lists of candidates participating in elections and called for the introduction of open lists."If the elections are held under the current law, I will not participate in them, and I will call on other people to boycott them, because this will be another political trick, which might bring Ukraine into another, more serious political confrontation," he said.He said that Ukraine would sooner or later settle the crisis and added this crisis had been created artificially.
"Snap elections are unnecessary. The recent [snap parliamentary] elections [of 2007] were unfruitful. It is necessary to amend electoral law to hold the elections," the Korrespondent magazine quoted him as answering questions from visitors to the Korrespondent web site.Kravchuk criticized the current system of closed lists of candidates participating in elections and called for the introduction of open lists."If the elections are held under the current law, I will not participate in them, and I will call on other people to boycott them, because this will be another political trick, which might bring Ukraine into another, more serious political confrontation," he said.He said that Ukraine would sooner or later settle the crisis and added this crisis had been created artificially.
Saturday, 14 February 2009
For migrant workers, crisis is hitting hard
The economic crisis has led to the halting of construction work on sites across Moscow and the rest of Russia, forcing the unemployment of tens of thousands of migrants from the poorest countries of the former Soviet Union.
Rustam Nargyzyev left his native Tajikistan for Russia, dreaming of making easy money to sustain his family back home in a modern day gold rush of frenetic construction in 21st-century Moscow.
Although his jobs over the last two years have always been on the black market, he never had to deal with contractors who did not pay him for his work.
But Rustam has been out of work since the economic crisis unleashed a whirlwind of havoc amongst the half-built shiny business centres and glitzy housing developments sprouting up throughout the city.
The now-unemployed construction foreman has had to repeatedly beg his former employer to pay him the wages he is owed for his last four months of work.
Since October, he and 27 members of a crew hired to plaster the walls of a large parking deck have not received a single rouble. The gates of the construction site have been padlocked.
The contractor "owes 1 million roubles (22,000 euros) to the 27 men who have worked here for two months. We haven't received a kopek and we were simply driven out of here," said Rustam.
He now dreams of only one thing - "returning home".
For its part, the contractor has told the workers it cannot pay, since the developer of the project has gone bankrupt.
Rustam, who is now staying with friends, travelled day after day to the construction site to convince the contractor, MIK-2007, to pay the wages of his men. Without work, his debts have mounted to around 1,000 euros.
"I'm not treating you like an asshole! I told you that you will be paid when the client pays us!" said Ivan Vassilyevich, the deputy director of MIK-2007, speaking to his former employee as they stood at the snow-covered site.
And Rustam and his plastering crew are not the only ones suffering.
According to a report by Mayor Yury Luzhkov's office issued last December, the city in 2008 had 2 million foreign workers, 90 percent of whom were illegal.
Since autumn, when the financial crisis began to hit Russia, organisations monitoring immigrant workers have noted a skyrocketing number of delayed or cancelled payments, a situation against which migrant workers are powerless.
"In December 2007 there were seven complaints against debtors. In December 2008 ... there were 48 cases. This is very strong growth," said Gauhar Dzhurayeva, the president of the Law and Migration Association.
Meanwhile, the Association of Tajik Migrant Workers reported receiving over 6,000 calls for assistance this past December, while it recorded only about 1,800 such calls over the same period in 2007.
"There are five children in our family. I am the oldest," said Argen Abditalipov, an 18-year-old Kyrgyz man who has not been paid since December, but who nonetheless does not want to leave.
"There, in Kyrgyzstan, there is no work and when there is, the salary is very low."
And Russian authorities do not seem to be willing to help the very people who have manned the building boom and put their skyscrapers into the sky let alone fight the abuse they face.
"Objectively, we expect an increase in crimes that could be committed by migrant workers," Deputy Interior Minister Mikhail Sukhodolsky said. "When a person is without means of sustenance... some choose the path of crime", he said, calling on the police "to be more vigilant."
Rustam Nargyzyev left his native Tajikistan for Russia, dreaming of making easy money to sustain his family back home in a modern day gold rush of frenetic construction in 21st-century Moscow.
Although his jobs over the last two years have always been on the black market, he never had to deal with contractors who did not pay him for his work.
But Rustam has been out of work since the economic crisis unleashed a whirlwind of havoc amongst the half-built shiny business centres and glitzy housing developments sprouting up throughout the city.
The now-unemployed construction foreman has had to repeatedly beg his former employer to pay him the wages he is owed for his last four months of work.
Since October, he and 27 members of a crew hired to plaster the walls of a large parking deck have not received a single rouble. The gates of the construction site have been padlocked.
The contractor "owes 1 million roubles (22,000 euros) to the 27 men who have worked here for two months. We haven't received a kopek and we were simply driven out of here," said Rustam.
He now dreams of only one thing - "returning home".
For its part, the contractor has told the workers it cannot pay, since the developer of the project has gone bankrupt.
Rustam, who is now staying with friends, travelled day after day to the construction site to convince the contractor, MIK-2007, to pay the wages of his men. Without work, his debts have mounted to around 1,000 euros.
"I'm not treating you like an asshole! I told you that you will be paid when the client pays us!" said Ivan Vassilyevich, the deputy director of MIK-2007, speaking to his former employee as they stood at the snow-covered site.
And Rustam and his plastering crew are not the only ones suffering.
According to a report by Mayor Yury Luzhkov's office issued last December, the city in 2008 had 2 million foreign workers, 90 percent of whom were illegal.
Since autumn, when the financial crisis began to hit Russia, organisations monitoring immigrant workers have noted a skyrocketing number of delayed or cancelled payments, a situation against which migrant workers are powerless.
"In December 2007 there were seven complaints against debtors. In December 2008 ... there were 48 cases. This is very strong growth," said Gauhar Dzhurayeva, the president of the Law and Migration Association.
Meanwhile, the Association of Tajik Migrant Workers reported receiving over 6,000 calls for assistance this past December, while it recorded only about 1,800 such calls over the same period in 2007.
"There are five children in our family. I am the oldest," said Argen Abditalipov, an 18-year-old Kyrgyz man who has not been paid since December, but who nonetheless does not want to leave.
"There, in Kyrgyzstan, there is no work and when there is, the salary is very low."
And Russian authorities do not seem to be willing to help the very people who have manned the building boom and put their skyscrapers into the sky let alone fight the abuse they face.
"Objectively, we expect an increase in crimes that could be committed by migrant workers," Deputy Interior Minister Mikhail Sukhodolsky said. "When a person is without means of sustenance... some choose the path of crime", he said, calling on the police "to be more vigilant."
Saturday, 7 February 2009
How low can the rouble go?
The rouble this week was hovering close to the Central Bank's latest line in the sand, 41 to the dollar, after the government has spent some $200 billion - one third of its international reserves - in managing the currency's decline against the dollar/euro basket in the last six months.
Most experts expressed some hope that the new trading floor would hold, but said a lot would depend on how long oil prices stay low
Yevgeny Gavrilenkov (chief economist, Troika Dialog): "In principle it is easy for them to keep the rouble at 41 against the basket. They have to stop lending roubles because the macroeconomic fundamentals mean they have to adjust the balance of payments to the oil price.
There is liquidity in the banking system but every day they inject more. A week ago it was still 800 billion roubles a day, although it is decreasing now. Liquidity was injected but banks lacked it because it went straight to the foreign exchange market. They need to raise interest rates to something that prohibits speculation, 20 per cent, 30 per cent, 1,000 per cent if necessary for a short period of time.
There is a need to adjust the currency to economic reality because the rouble was overheated in previous years on the back of high and permanently rising oil prices. It is back to what it was four years ago in real terms.
Ideally we need a floating exchange rate, but as long as they keep lending money at a negative real interest rate it will be very difficult to find the bottom."
Martin Gilman (professor, Higher School of Economics, and a former IMF representative in Russia):
"The government can protect the rouble in the short run. They have almost $400 billion in reserves to back up their exchange rate policy. However, they wouldn't want to throw all their reserves at the exchange rate.
It is critically important that the population does not panic because the greatest danger to the rouble is if the population has a run on it. In that respect, the Central Bank's policy of small step devaluations has been sensible as people have moved deposits into dollars.
The Central Bank can hold the rouble around 41 against the basket providing oil stays above $35. Below that they will have to expand the band. In the longer term if oil prices do deteriorate they should not even try to protect the currency.
Monetary policy should be tightened, which they have been doing over the last few weeks. If you can create a demand for rouble liquidity with higher interest rates this will discourage conversions into foreign exchange."
Alexei Moisseyev (deputy head of research, Renaissance Capital):
"Assuming oil prices hold, it is likely that the rouble will be controlled by the Central Bank at the current level - 41 to the basket, though clearly the dollar-rouble rate could fall further as a result of a decline in the euro.
I think we could expect the world economy to start showing some tentative signs of recovery by the second half of 2009, which would result in a rebound in commodity prices towards more sustainable levels, which, in turn, will lead to the rouble strengthening.
As far as trade, and, more broadly, the current account are concerned, the existing rouble value is fair. However, it is clearly not sufficient to cover the upcoming debt payments of Russian banks and corporations, so there is no realistic equilibrium value at the moment. Debt payments are high, so the Central Bank will have to continue to support the current exchange rate via its reserves.
In the medium term, the dollar will weaken as a result of expansionary monetary policy, which will also help the rouble strengthen against the dollar."
Ronald Smith (head of research, Alfa Bank):
"The market will test the current trading band for the rouble but there are no calls for further devaluations. At the moment it is at about the right level and it is hard to see it going further.
The stability of the managed float has helped investors and traders but too much of the reserves have been expended. The rouble should have been devalued to this level much earlier on and then held at a weaker value. However, if they let it float freely it will create unwanted instability.
In the medium term, the rouble depends on the oil price. If the U.S. Federal Reserve prints too much money, oil prices will go up again but too little and prices will go down. Nobody expects them to get it right.
At the moment the Central Bank is providing rouble liquidity but this is immediately being converted into dollars. However, the banking system needs it so they have a double problem."
Most experts expressed some hope that the new trading floor would hold, but said a lot would depend on how long oil prices stay low
Yevgeny Gavrilenkov (chief economist, Troika Dialog): "In principle it is easy for them to keep the rouble at 41 against the basket. They have to stop lending roubles because the macroeconomic fundamentals mean they have to adjust the balance of payments to the oil price.
There is liquidity in the banking system but every day they inject more. A week ago it was still 800 billion roubles a day, although it is decreasing now. Liquidity was injected but banks lacked it because it went straight to the foreign exchange market. They need to raise interest rates to something that prohibits speculation, 20 per cent, 30 per cent, 1,000 per cent if necessary for a short period of time.
There is a need to adjust the currency to economic reality because the rouble was overheated in previous years on the back of high and permanently rising oil prices. It is back to what it was four years ago in real terms.
Ideally we need a floating exchange rate, but as long as they keep lending money at a negative real interest rate it will be very difficult to find the bottom."
Martin Gilman (professor, Higher School of Economics, and a former IMF representative in Russia):
"The government can protect the rouble in the short run. They have almost $400 billion in reserves to back up their exchange rate policy. However, they wouldn't want to throw all their reserves at the exchange rate.
It is critically important that the population does not panic because the greatest danger to the rouble is if the population has a run on it. In that respect, the Central Bank's policy of small step devaluations has been sensible as people have moved deposits into dollars.
The Central Bank can hold the rouble around 41 against the basket providing oil stays above $35. Below that they will have to expand the band. In the longer term if oil prices do deteriorate they should not even try to protect the currency.
Monetary policy should be tightened, which they have been doing over the last few weeks. If you can create a demand for rouble liquidity with higher interest rates this will discourage conversions into foreign exchange."
Alexei Moisseyev (deputy head of research, Renaissance Capital):
"Assuming oil prices hold, it is likely that the rouble will be controlled by the Central Bank at the current level - 41 to the basket, though clearly the dollar-rouble rate could fall further as a result of a decline in the euro.
I think we could expect the world economy to start showing some tentative signs of recovery by the second half of 2009, which would result in a rebound in commodity prices towards more sustainable levels, which, in turn, will lead to the rouble strengthening.
As far as trade, and, more broadly, the current account are concerned, the existing rouble value is fair. However, it is clearly not sufficient to cover the upcoming debt payments of Russian banks and corporations, so there is no realistic equilibrium value at the moment. Debt payments are high, so the Central Bank will have to continue to support the current exchange rate via its reserves.
In the medium term, the dollar will weaken as a result of expansionary monetary policy, which will also help the rouble strengthen against the dollar."
Ronald Smith (head of research, Alfa Bank):
"The market will test the current trading band for the rouble but there are no calls for further devaluations. At the moment it is at about the right level and it is hard to see it going further.
The stability of the managed float has helped investors and traders but too much of the reserves have been expended. The rouble should have been devalued to this level much earlier on and then held at a weaker value. However, if they let it float freely it will create unwanted instability.
In the medium term, the rouble depends on the oil price. If the U.S. Federal Reserve prints too much money, oil prices will go up again but too little and prices will go down. Nobody expects them to get it right.
At the moment the Central Bank is providing rouble liquidity but this is immediately being converted into dollars. However, the banking system needs it so they have a double problem."
How low can the rouble go?
The rouble this week was hovering close to the Central Bank's latest line in the sand, 41 to the dollar, after the government has spent some $200 billion - one third of its international reserves - in managing the currency's decline against the dollar/euro basket in the last six months.
Most experts expressed some hope that the new trading floor would hold, but said a lot would depend on how long oil prices stay low
Yevgeny Gavrilenkov (chief economist, Troika Dialog): "In principle it is easy for them to keep the rouble at 41 against the basket. They have to stop lending roubles because the macroeconomic fundamentals mean they have to adjust the balance of payments to the oil price.
There is liquidity in the banking system but every day they inject more. A week ago it was still 800 billion roubles a day, although it is decreasing now. Liquidity was injected but banks lacked it because it went straight to the foreign exchange market. They need to raise interest rates to something that prohibits speculation, 20 per cent, 30 per cent, 1,000 per cent if necessary for a short period of time.
There is a need to adjust the currency to economic reality because the rouble was overheated in previous years on the back of high and permanently rising oil prices. It is back to what it was four years ago in real terms.
Ideally we need a floating exchange rate, but as long as they keep lending money at a negative real interest rate it will be very difficult to find the bottom."
Martin Gilman (professor, Higher School of Economics, and a former IMF representative in Russia):
"The government can protect the rouble in the short run. They have almost $400 billion in reserves to back up their exchange rate policy. However, they wouldn't want to throw all their reserves at the exchange rate.
It is critically important that the population does not panic because the greatest danger to the rouble is if the population has a run on it. In that respect, the Central Bank's policy of small step devaluations has been sensible as people have moved deposits into dollars.
The Central Bank can hold the rouble around 41 against the basket providing oil stays above $35. Below that they will have to expand the band. In the longer term if oil prices do deteriorate they should not even try to protect the currency.
Monetary policy should be tightened, which they have been doing over the last few weeks. If you can create a demand for rouble liquidity with higher interest rates this will discourage conversions into foreign exchange."
Alexei Moisseyev (deputy head of research, Renaissance Capital):
"Assuming oil prices hold, it is likely that the rouble will be controlled by the Central Bank at the current level - 41 to the basket, though clearly the dollar-rouble rate could fall further as a result of a decline in the euro.
I think we could expect the world economy to start showing some tentative signs of recovery by the second half of 2009, which would result in a rebound in commodity prices towards more sustainable levels, which, in turn, will lead to the rouble strengthening.
As far as trade, and, more broadly, the current account are concerned, the existing rouble value is fair. However, it is clearly not sufficient to cover the upcoming debt payments of Russian banks and corporations, so there is no realistic equilibrium value at the moment. Debt payments are high, so the Central Bank will have to continue to support the current exchange rate via its reserves.
In the medium term, the dollar will weaken as a result of expansionary monetary policy, which will also help the rouble strengthen against the dollar."
Ronald Smith (head of research, Alfa Bank):
"The market will test the current trading band for the rouble but there are no calls for further devaluations. At the moment it is at about the right level and it is hard to see it going further.
The stability of the managed float has helped investors and traders but too much of the reserves have been expended. The rouble should have been devalued to this level much earlier on and then held at a weaker value. However, if they let it float freely it will create unwanted instability.
In the medium term, the rouble depends on the oil price. If the U.S. Federal Reserve prints too much money, oil prices will go up again but too little and prices will go down. Nobody expects them to get it right.
At the moment the Central Bank is providing rouble liquidity but this is immediately being converted into dollars. However, the banking system needs it so they have a double problem."
Most experts expressed some hope that the new trading floor would hold, but said a lot would depend on how long oil prices stay low
Yevgeny Gavrilenkov (chief economist, Troika Dialog): "In principle it is easy for them to keep the rouble at 41 against the basket. They have to stop lending roubles because the macroeconomic fundamentals mean they have to adjust the balance of payments to the oil price.
There is liquidity in the banking system but every day they inject more. A week ago it was still 800 billion roubles a day, although it is decreasing now. Liquidity was injected but banks lacked it because it went straight to the foreign exchange market. They need to raise interest rates to something that prohibits speculation, 20 per cent, 30 per cent, 1,000 per cent if necessary for a short period of time.
There is a need to adjust the currency to economic reality because the rouble was overheated in previous years on the back of high and permanently rising oil prices. It is back to what it was four years ago in real terms.
Ideally we need a floating exchange rate, but as long as they keep lending money at a negative real interest rate it will be very difficult to find the bottom."
Martin Gilman (professor, Higher School of Economics, and a former IMF representative in Russia):
"The government can protect the rouble in the short run. They have almost $400 billion in reserves to back up their exchange rate policy. However, they wouldn't want to throw all their reserves at the exchange rate.
It is critically important that the population does not panic because the greatest danger to the rouble is if the population has a run on it. In that respect, the Central Bank's policy of small step devaluations has been sensible as people have moved deposits into dollars.
The Central Bank can hold the rouble around 41 against the basket providing oil stays above $35. Below that they will have to expand the band. In the longer term if oil prices do deteriorate they should not even try to protect the currency.
Monetary policy should be tightened, which they have been doing over the last few weeks. If you can create a demand for rouble liquidity with higher interest rates this will discourage conversions into foreign exchange."
Alexei Moisseyev (deputy head of research, Renaissance Capital):
"Assuming oil prices hold, it is likely that the rouble will be controlled by the Central Bank at the current level - 41 to the basket, though clearly the dollar-rouble rate could fall further as a result of a decline in the euro.
I think we could expect the world economy to start showing some tentative signs of recovery by the second half of 2009, which would result in a rebound in commodity prices towards more sustainable levels, which, in turn, will lead to the rouble strengthening.
As far as trade, and, more broadly, the current account are concerned, the existing rouble value is fair. However, it is clearly not sufficient to cover the upcoming debt payments of Russian banks and corporations, so there is no realistic equilibrium value at the moment. Debt payments are high, so the Central Bank will have to continue to support the current exchange rate via its reserves.
In the medium term, the dollar will weaken as a result of expansionary monetary policy, which will also help the rouble strengthen against the dollar."
Ronald Smith (head of research, Alfa Bank):
"The market will test the current trading band for the rouble but there are no calls for further devaluations. At the moment it is at about the right level and it is hard to see it going further.
The stability of the managed float has helped investors and traders but too much of the reserves have been expended. The rouble should have been devalued to this level much earlier on and then held at a weaker value. However, if they let it float freely it will create unwanted instability.
In the medium term, the rouble depends on the oil price. If the U.S. Federal Reserve prints too much money, oil prices will go up again but too little and prices will go down. Nobody expects them to get it right.
At the moment the Central Bank is providing rouble liquidity but this is immediately being converted into dollars. However, the banking system needs it so they have a double problem."
Saturday, 31 January 2009
Yushchenko Blames Tymoshenko For Economic Woes
KIEV, Ukraine -- President Viktor Yushchenko on Friday demanded that his arch rival, Ukraine's prime minister, alter the 2009 budget to withstand the world financial crisis.
The president accused Prime Minister Yulia Tymoshenko, his estranged ally from the 2004 "Orange Revolution", of deliberately drafting a budget with targets he said were impossible to fulfil."I hereby appeal to Yulia Tymoshenko and to the majority in parliament that she has put together. This is your responsibility," Yushchenko said in a televised address."You have knowingly included in the budget inflated indicators and promises that cannot be fulfilled today."Members of parliament backing the prime minister, he said, were "supporting populism which tomorrow will turn into unpaid salaries, pensions, stipends and social benefits"."On behalf of the entire country I demand that the government and parliament put together an honest budget in which expenditure matches the possibilities afforded by our economy."Responding in a statement issued late on Jan. 30, Tymoshenko blasted Yushchenko, calling his words “a mix of lies, panic and hysteria.”“Everyone saw that the president is not that leader which is needed now, when the country is in the midst of a deep world economic crisis facing a test of its strength. I will not cover up the true situation with makeup, but I will also not sow panic,” she said.“If the president cannot find a way to help, he should not interfere,” she said.The budget, passed just before the New Year, provides for negative growth of only 0.4 percent against forecasts by some bodies, including the economy minister, of minus 5 percent as Ukraine is battered by the effects of the crisis.Industrial production in the ex-Soviet state plunged between 20-30 percent in October and December and growth shrank by over 14 percent in November and December month-on-month. The economy grew 2.1 percent in 2008 against 7.6 percent in 2007.The budget also provides for a deficit of 3 percent despite a stipulation by the International Monetary Fund that it be deficit-free. An IMF mission is currently in Kiev to review progress by the government and determine whether to disburse the second tranche of a $16.4 billion credit approved last year.The prime minister has defended her government's budget and vowed to implement it. The tone of both leaders has become increasingly strident, with the prime minister repeatedly calling on Yushchenko to resign.In his remarks, Yushchenko said he backed reservations on the budget attributed this week to Finance Minister Viktor Pynzenyk on a major Internet site. Pynzenyk dissociated himself from the report without making an outright denial.Yushchenko has been at odds with Tymoshenko on virtually all policy issues since she became premier a second time in 2007 and in his remarks repeated allegations that she had clinched a gas supply and pricing deal with Russia detrimental to Ukraine.The prime minister, he said, was deliberately responsible for "the economic situation, the disruption of the budget process, the wrecking of the banking system ... Enough of lies."He vowed to defend Ukrainians against the effects of the crisis and called on the chairman of parliament to take action to ensure that the budget would be suitably amended.Tymoshenko denied Yushchenko’s accusation that citizens could not be paid pensions and salaries due to a major shortfall in budget revenues.“I have a sad news for the president, but optimistic information for the country. Despite the crisis, the state budget in January has been over fulfilled. Budget-funded salaries and pensions will be paid on time and in full,” she said adding that energy tariffs will not be raised on households.
Friday, 30 January 2009
Shuvalov: Tycoons Won't All Get Help
DAVOS, Switzerland -- Russia will not write a blank check to save top businessmen hit by the global economic crisis, and the state expects something in return for helping bail them out, First Deputy Prime Minister Igor Shuvalov said Thursday.Some of Russia's richest men, who borrowed billions of dollars in the boom years during Vladimir Putin's presidency, face difficulties because the value of collateral they put up as security for major loans has plummeted.Russia has spent large amounts helping businessmen such as metals tycoon Oleg Deripaska, once Russia's richest man, refinance foreign debt.But Shuvalov said businessmen should not expect the state to help them with everything and they would have to make compromises."We must have understanding. ... We see that many enterprises that we work with, and their shareholders, have started to feel that the state will save them no matter what," he told reporters at the World Economic Forum in the Swiss ski resort of Davos."Against this background, they have begun to think ... that the state will help them no matter, help them to refinance their foreign debts and give them special programs to buy their production. We have nothing like this in our plans."Russia has spent about $11 billion through state corporation VEB to refinance companies' foreign debts and had received requests for much more financial help, Shuvalov said.He gave no details, but VEB chairman Vladimir Dmitriyev told reporters that Russian companies had made bids for about $90 billion to help them restructure their foreign debts.Russian corporations must pay back $115.7 billion in foreign debt and interest this year, according to government estimates.Putin told investors in Davos on Wednesday that excessive state intervention in the economy would be a mistaken reaction to the crisis.He also said businessmen would have to take responsibility for their decisions, although the state would continue to support national champions."Just because the enterprise is important and has several tens of thousands of workers, we do not simply intend to give out resources and wait for them to come for more later," said Shuvalov, an influential figure in Putin's government."The shareholders and heads of these enterprises must for themselves look at their own personal responsibility," he said.Deripaska last year used his 25 percent stake in Norilsk Nickel, the world's leading producer of nickel and palladium, as collateral for a $4.5 billion loan from VEB.Norilsk's largest shareholder, Vladimir Potanin, and Deripaska, who controls aluminum giant United Company RusAl, have proposed pooling their metals assets with other miners to create an entity that would be part-owned by the Kremlin and wipe out their debts.
State Lays Out Job Stimulus Program
Opening up a private business in Russia may no longer prove to be a daunting task — for the unemployed, that is. To stimulate employment and the economy, the government will give 60,000 rubles ($1,700) to unemployed Russians as startup capital to open small businesses, Deputy Health and Social Development Minister Maxim Topilin said Thursday. In addition, the government will provide subsidies to companies to put employees facing imminent layoffs through re-education and training programs, Topilin said. Other workers will be paid to relocate to areas within their regions where jobs can still be found. Topilin announced these and other measures aimed at fighting the country's billowing unemployment rate on Thursday and said they would be implemented as early as next week in the five regions that had most quickly offered proposals for the federal government's 43 billion ruble ($1.3 billion) employment-stabilization package: Krasnoyarsk, Yaroslavl, Tatarstan, Tyumen and Bryansk."Now [unemployment] stands at 5.8 million [people]. It is difficult to forecast, but I think it could reach around 7 million by the end of this year," Topilin told reporters.The number of unemployed workers rose by 1 million from September to December, now making up 7.7 percent of the work-age population, according to the State Statistics Service, which calculated its figures using the International Labor Organization's methodology. Despite numerous appeals by President Dmitry Medvedev and Prime Minister Vladimir Putin, many regional governments missed a Jan. 15 deadline to submit proposals to stimulate employment."We had to extend the deadline indefinitely," said Yevgenia Okoreva, a spokeswoman for the Health and Social Development Ministry, which is implementing the program. As of Thursday, 66 regions had submitted proposals, Okoreva said. Not all of Russia's 83 regions are required to submit proposals. The city of Moscow, for example, is not seeking federal funds and has created its own department to tackle the issue.Next Monday, agreements between the federal government and the five regions whose programs were approved will be signed, and "nothing will stop them from getting to work," Topilin said.The federal government will subsidize 95 percent of each region's employment program, but the regions must come up with the remaining 5 percent and adjust their 2009 budgets accordingly. Zoya Rozhnova, the head of Krasnoyarsk city's employment service, said by telephone that she was "thrilled" that the government was allocating the entire region 667 million rubles ($19.7 million) in unemployment relief.Before submitting their program to the government, Krasnoyarsk government and labor authorities went to major regional employers to evaluate their labor situation and ask them about their needs for workforce retraining programs, Rozhnova said."We are very optimistic that the funds will make a difference here," she said. The government is clearly worried about soaring unemployment. Medvedev told regional authorities at a conference on Jan. 21 that "job security is one of our top priorities, one of the government's principal social obligations.""Unemployment and the labor market have never gotten as serious attention from the government as now," said Dmitry Badovsky, deputy director of Moscow State University's Institute of Social Systems. As of Jan. 21, some 14,100 businesses around the country had announced imminent plans to lay off 365,000 employees and reduce 549,000 full-time workers to part-time, an employment status that also includes mandatory unpaid vacation, Topilin said. The government's employment-stabilization program is made up of four components — specialist training and workforce re-education, public works creation, job relocation assistance and small business development.The government's aim is to create at least 901,000 jobs, including 700,000 new temporary positions across the country and 50,000 new jobs in small business. It also will offer professional development and training programs for 114,000 workers facing imminent layoffs; give companies subsidies to pay for the employment trial period for 10,000 new university graduates; and subsidize the costs for 27,000 people to move to work in another area of their region.A large portion of the temporary jobs the government aims to create will be in the area of public works, including infrastructure and municipal services projects such as road building and the painting and cleaning up of schools and hospitals, Topilin said. For small business, the government will give 60,000 rubles to a target number of 50,000 unemployed Russian citizens to open their own enterprises, Topilin said. Only those officially registered as unemployed will be eligible to apply for the funds, a one-year advance payment on their monthly unemployment checks. The regional governments' employment agencies will help applicants legally register their businesses and create business plans.While praising the government for its attention to the labor market, economists and employment specialists were skeptical of the program's economic effectiveness. "It is well-documented and proven that subsidizing jobs is not an effective method of job creation," said Vladimir Gimpelson, director of the Higher School of Economics' Center for Labor Research. "When the subsidies stop, the jobs go too."Gimpelson was also pessimistic about giving money to the unemployed to open businesses."The usual corruption, bureaucratic regulation and inefficiency of government administration will get in the way," he said. Alexandra Eftivyeva, chief economist at VTB Capital, said the best way to support employment was not to directly support people but to help their employers "restore their working capital credit.""Right now, companies are laying off because they do not have enough capital to pay salaries," she said.Gimpelson said it would be difficult to find jobs even for those retrained in new fields of work. He compared Russia's labor market to an ocean with two islands: a "vacancy" island and an "unemployed" island. "For the unemployed to get to the island of vacancies, they get retrained and educated on the way," he said. "But now we only have one island: the island of the unemployed, and no island with vacancies. Until the island with vacancies comes back, I don't know how the program for re-education can work."
Saturday, 13 December 2008
IMF Satisfied With Ukraine Loan Plan Amid Crisis
KIEV, Ukraine -- Ukraine is on the right track in implementing policies it had committed to when accepting an emergency loan to survive its worst economic crisis in a decade, an official from the International Monetary FunUkraine has so far received more than a quarter of a $16.4 billion IMF rescue loan to help it cope with an economic crisis brought on by a drastic fall in its exports of its main commodity, steel, and in its national currency, the hryvna.Ceyla Pazarbasioglu, the head of the IMF mission to Ukraine, was quoted by the daily Kommersant Ukraine as backing the central bank's policies to let the market determine exchange rates and to recapitalize major banks.Pazarbasioglu also countered speculation that financial regulators were misusing the IMF funds."So far we have no comments or remarks and we have not felt in any way that the IMF funds are being used inappropriately," she was quoted as saying.Meanwhile, the depth of the economic slump was illustrated by data from the State Statistics Bureau, which late Thursday said industrial output fell 29 percent in November from a year earlier, the biggest decrease in a decade.Parliament on Friday passed more legislation to soften the effects of the crisis. Lawmakers backed increasing funding for pensions, deposit insurance and prohibiting banks from unilaterally reconsidering the conditions of loans.Lawmakers approved a transfer of 3.2 billion hryvna ($415 million) to the state oil and gas company Naftogaz, crippled by a $2.4 billion debt to Russia's natural gas giant Gazprom for imports.Naftogaz officials traveled to Moscow Friday to continue talks on settling the debt and agreeing for next year's imports.Russia is threatening to more than double the price for Ukraine's imports to over $400 per 1,000 cubic meters if Kiev fails to pay off the entire debt.d said in an interview published Friday
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