Crisis in Europe and Forecasts for Russia

By Vadim Massalsky

“It’s absolutely evident, that Europe experiences the period of troubles. However, our article doesn’t touch upon these troubles in general. It focuses on the period following these troubles. And its objective is to define tasks, which European Governments will have to complete to stop the current unequal recession in economy and to achieve a steady and persistent growth”. This declaration was made by the Head of a Permanent Representative Office of the International Monetary Fund (IMF) to Russia Odd Per Brekk presenting another regional European report during the meeting with Moscow press.
The IMF representative specified the four key conclusions of the report. First of all, the rehabilitation of European economy is still partially depends on the state support measures, but the EU “comes up to the limit of efficiency” of this very support. That is why each of European states should develop its plan of withdrawal of state interference into national economy.
Secondly, these national plans should be “accurately coordinated” to avoid “a new wave of financial instability”. This is especially important for the European Union where economies are tightly interconnected. But this is also important for Russia, which plays a significant role within the “Great Twenty”.

Thirdly, they should correct the mistake done within financial and primarily within budget policy of European states and also within the promotion of structural forms.

And finally, the fourth, fluctuations of the international capital flows will probably prolong. And this sets serious tasks for European states with still developing markets, including also Russia.

In its turn the Head of the IMF European Department Helge Berger announced the following “pretty modest” forecast of European economy rehabilitation. In 2010 – 1, and in 2011 – 1.5%. The growth of Russian economy will comprise respectively 4% this and 3.3% next year. Insufficient slowdown as the colleague of Helge Berger Odd Per Brekk explained later, has a “formal-technical” character and in reality doesn’t prove the slowing of the growth rates in Russia in 2011.
Helge Berger underlined that in comparison with the USA and leading states of Asia, the rehabilitation of European economy in general delays, and obviously, will be behind next two years. As an example, the analysts presented an acute crisis in Greece, which has become “a convincing reminder of old defects of the budget architecture of this region”. However, “extended measures”, adopted by the European Union and European Central Bank literally the previous weekend, let us hope, that financial situation in Greece can become more steady, stated Helge Berger. And this, Odd Per Brekk added in his turn, will favorably influence Russia as a leading trade-economic partner of the European Union.
Replying on the questions of Moscow reporters, the representatives presented quite a favorable financial-economic forecast for the Russian Federation. As Odd Per Brekk stated, the rate of the ruble in general corresponds to middle-term and fundamental economic indexes, that is why there is no need to adopt any emergency measures to protect national currency. The Head of the Permanent Representative Office of the International Monetary Fund in Moscow also expressed his support of the measures to the Russian Government to accomplish a “key” task to the view of the IMF– gradual “reduction of inflation and its retention at a low level”.

“Today Russia has a firm budget situation, there are no problems with liquidity, the bank system is stable – resumed Odd Per Brekk. – Currency reserves of Russia are very high, no matter how you count them. They comprise 20 months of import supplies. They 4 time higher than the external debt of the country”. However, added the expert, rapid reduction of GDP in Russia last year is a reminder that there are structural problems to be solved and they include a great dependence of oil incomes, significant inflation rate, and insufficient development of investment environment.
Translated by EuroDialogueXXI from VOA