Russia expects new outburst of financial problems

Russia’s Finance Ministry is expecting another outburst of problems in the financial system. The problems are going to be connected with the credit default in the real sector of economy and with the reduction of oil prices, Russia’s Finance Minister Aleksei Kudrin said Tuesday. Russian stock indexes collapsed after the minister’s statements.

Photo: Russia expects new outburst of financial problems

“We are expecting the next outburst of financial problems. It will be a back wave linked with the credit default in the real sector of economy,” the minister said. He added that one should not hope for an increase of product demand in the real sector of economy, Interfax reports.

The demand, which the government stimulates, is a short-term artificial instrument. “The demand of the state is artificial, it’s like a dropping bottle for a patient, to help him recover at least a little,” the minister said.

Mr. Kudrin also said that the Russian government and the Central Bank paid a lot to ease the consequences of the first wave of the crisis in the national financial system.

“We were standing on the brink of the financial collapse, but we prevented it, and I must here thank the Central Bank and the State Duma for giving us an opportunity to take decisions quickly,” Kudrin said. He continued with saying that the Russian economy would have collapsed like it did in 1998, if urgent measures had not been taken.

“We must realize the fact that banks manage the funds of their clients and depositors when they give loans to companies – this makes up 60 percent of the total amount of funds. Therefore, when you hear someone saying that banks should take risks in their activities, we must realize that our money will be at stake there,” the minister said.

Russian President Dmitry Medvedev said last week that the Russian government should not allow situations when selfish requirements of creditors may disrupt the activities of large enterprises. Journalists say that the finance minister and the president differ in their approaches to various issues.

Aleksei Kudrin believes that the rise of international stock markets and oil prices was a temporal phenomenon, RIA Novosti reports.

“The challenges of the world economic crisis are still preserved. We must not relax over a certain rise of stock indexes and oil prices,” he said.