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  • Press Conference on Russia’s G20 Presidency by G20 Sherpa Ksenia Yudaeva and Finance Minister Anton Siluanov

Press Conference on Russia’s G20 Presidency by G20 Sherpa Ksenia Yudaeva and Finance Minister Anton Siluanov

A news conference on Russia’s G20 Presidency by Minister of Finance Anton Siluanov and Chief of the Presidential Experts’ Directorate and the Russian G20 Sherpa Ksenia Yudaeva was held at RIA Novosti on December 3.

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Moderator: Good afternoon, ladies and gentlemen! Welcome to RIA Novosti's  multimedia press center. Today's news conference is dedicated to Russia's G20 presidency.

As you are aware, Russia took over the G20 presidency yesterday, December 1, 2012. Today, we will discuss the G20's objectives, goals of Russia's presidency and the importance of the G20 presidency for our country.

I am pleased to introduce our guests today: Ksenia Yudaeva, Chief of the Presidential Experts’ Directorate and the Russian G20 Sherpa, and Minister of Finance Anton Siluanov.

Ms Yudaeva, over to you.

Ksenia Yudaeva: Thank you. Before we get started, let's quickly go over what the Group of Twenty is all about. The G20 in its present form - as a summit and a top-level presidential program - was established in the fall of 2008 at the peak of the global crisis. At the time, it was a symbol of the member countries' readiness to join forces in order to stop the acute phase of the crisis and get the global economy back on track.

As a matter of fact, this remains the main agenda of the Group of Twenty. Of course, the acute phase of the crisis is behind us, but not all problems have yet been resolved and not all imbalances have been corrected.

The G20 also focuses significantly on reforming international financial institutions, because the world has changed drastically as compared with 1944-1945, when international financial institutions were first established. Negotiations are underway to change the global economic and financial administration arrangements, and the G20 is, in fact, at the forefront of these changes.

For Russia, the G20 presidency is a great opportunity to have a say in the process, to act as a leader, make known its point of view of international affairs and, accordingly, implement some of its ideas through this forum and work out a new agenda to promote sustainable economic growth and a more adequate system of representation at international financial institutions.

Russia's top priorities for the G20 presidency are as follows. The first concerns investment to promote growth and employment. We all know that growth in the long and medium term is impossible without investment. In recent years, investment in the world economy has slowed down for a variety of reasons. Financial markets and the real sector are still plagued with problems. This is why we focus so much on investment, which we believe is pivotal if we want to overcome the crisis and resume long-term sustainable growth.

Second are trust and transparency on the markets, which are prerequisites for economic growth. Economic growth is our top priority, as you'll see later, but it's clear why we are focusing so intently on trust and transparency in the markets. It's because we lack trust ... Trust is a product of transparency and a clear understanding of ongoing developments. However, a lack of trust is largely the reason for continued difficulties, including on the financial markets; therefore, we will be paying special attention to issues of trust and transparency.

The third priority has to do with effective regulation to promote growth. You are well aware that financial regulations are traditional areas of focus for the Group of Twenty. Russia will use its presidency to take a deeper look into regulations, in particular in the energy sector.

We are focusing our work on these three key priorities, which encompass all traditional topics discussed by the G20. Furthermore, many of the issues were started long ago, remain relevant and must be freshly addressed. Each new presidency has to pay considerable attention to implementation of decisions made by previous presidencies. Decisions are made by consensus; therefore we will have to simultaneously finish old business and take up new issues based primarily on our understanding of the ever-changing global economy.

Therefore, we will be working based on these priorities and the standard agenda. We will not introduce any fundamentally new issues. Allow me to go over the main areas of work that lie ahead of us.

First is an analysis of the global economy's current status and prospects, and the implementation of the Framework for Strong, Sustainable and Balanced Growth. The second topic is employment. We are going to focus on job creation, combating long-term unemployment and promoting employment of vulnerable groups of workers. Third is reform of financial regulations and oversight, which is a traditional topic of discussion for the Group of Twenty, which evolved from meetings of finance ministers. Next, sustainable development of global energy markets. This is also a traditional topic for the Group of Twenty. There's also the issue of price volatility and ways to keep such volatility in check. As I said before, we plan to take an up-close look at regulations and at how they promote investment in the infrastructure in general, and we will continue the green growth discussions that were started under the Mexican presidency.

Next, reform of the international monetary system. I believe Mr. Siluanov will speak in more detail about financial matters. Next, promoting international development, which was traditionally discussed within the G8. The G20 began to deal with this issue after the Korean presidency, which was several years ago. Certainly, this is an important issue for the G20, since it has to do with relations between the G20 that includes advanced and less advanced but nevertheless major economies, as well as countries with lower levels of development, and the G20's ability to help these economies to progress. This is a priority issue for the G20.

Next, improving multilateral trade. This topic has been critical for the G20 from the outset. Those of you who understand the inner workings of international trade know that this issue can be fixed only through joint efforts. Only together will we be able to create trade arrangements that will promote economic growth for all. That is why there are multilateral trade negotiations and negotiations between groups of countries. Back in 2008, the G20 set a goal to prevent a repeat of the 1930s, when international trade collapsed in the wake of the Great Depression thereby prolonging the economic downturn. That's why this issue is a top priority for the G20.

And lastly, the task of combating corruption is connected with the issues of trust and transparency, as I have said. Russia will propose several new issues, in particular, financing investment as the basis of economic growth and the creation of jobs, as well as modernizing the national system of sovereign borrowing and managing sovereign debt. These issues will be the direct responsibility of the Finance Ministry and so I believe that Mr. Siluanov will be in a position to speak about them in more detail.

I'd like to say a few more words about the proposed agenda for the coming year. What does the G20 presidency mean? Of course, it involves more than just the summit. The presidency is a process of decision making. First we draft the agenda and then we add details to it. We are drafting the first reference materials for the issues I have enumerated, and then we will discuss them in detail at the level of experts, Sherpas, deputy ministers and ministers, until we formulate our recommendations and the final communiqué of the summit.

This process involves many meetings and conferences, as well as consultations with two groups of partners.

Firstly, the G20 is the responsibility of the government and the Finance Ministry, and so we need to cooperate with social partners, businesses, civil society, trade unions and youth communities of the G20 countries. Our plans for next spring and summer include relevant summits and meetings, during which all of the aforementioned groups will draft recommendations to the G20 which will be taken into account during the preparation of final documents.

Secondly, we are holding consultations with non-member countries, because the G20 is a forum of the world's leading economies. The G20 economies account for 90% of the global GDP, but there are more than 20 countries in the world. To be effective, the G20 must be trusted by other countries. It must lead this process, paving the way for all other countries. To be able to do this efficiently, the G20 must cooperate with other countries, inform them about its principles and agenda, and discuss their needs with them and take them into account in its policy. This is why the G20 is highlighting the issue of cooperation with other countries within the framework of the outreach program, and also with international organizations, such as the UN. Besides, the G20 is working jointly with international organizations that have broad expertise in these spheres, such as the International Monetary Fund, the OECD, the World Bank, the ILO and others. All expert international organizations are closely cooperating with the G20 in these areas.

Russia will use its presidency to focus our efforts on the main spheres at the level of Sherpas and the Labor Ministry. An innovative element of our presidency is the proposal to hold a joint meeting of the ministers of labor and finance to discuss issues of employment. I'll conclude my opening remarks here. I will be glad to answer your questions.

Moderator: Thank you, Ms. Yudaeva. Mr. Siluanov, please proceed.

Anton Siluanov: Initially, the G20 met to discuss financial and economic issues, which remain a priority at the meetings of the G20 leaders. The G20 summit will be held on September 5-6, 2013 in St. Petersburg, but before then we will hold a large number of meetings of Finance Ministers and their deputies. The Finance Ministers will hold four meetings and there will be at least as many meetings between our colleagues from the G20 Finance Ministries.

In other words, the focus will be on the world economic situation. This is a traditional issue, because the situation in the world economy changes quite rapidly. The G20 countries will highlight the measures they are taking or that they need to take to change, or rather to improve, the world economic situation, and they will also draft a package of structural measures.

Ms. Yudaeva has enumerated our proposals. We believe it is necessary to focus on sources of economic growth, because we see that the rate of growth of the global economy is slowing, and we see signs of recession in a number of countries. What should be done to overcome these difficulties? What are the sources of economic growth and of resuming growth, and where can we find them? What measures should the governments take and what kind of financial regulation should be used to stimulate production and economic growth? These issues are among the priorities that we will discuss.

Ms. Yudaeva has said that we will highlight the issue of sovereign debt. Why has the rate of growth slowed? The answer is that the debt situation in a number of countries has made investors worried. Investors see that large debts in a number of countries force them to choose between reducing the sovereign demand, increasing taxes and taking other measures. In other words, we need a clear vision of the direction in which the affected countries will move to reduce their debts, because without this understanding we will be unable to resolve the issue of sources of economic growth. It is a fact that investment is shrinking because investors are not confident of the near and more distant future, and because, as we have said, it is unclear what choice the countries will make to reduce their debts. They could increase taxes, which would make the investors' planned projects in these countries unprofitable and ineffective, which is why investment is being reduced.

The question is, what impetus should we provide in this situation? How can we stimulate a more positive mood among investors to revive their trust, as we often say? These are crucial issues which we will address during Russia's presidency. Furthermore, we should seriously consider the questions of improving the financial architecture, the distribution of quotas and the formula for calculating IMF quotas. These are the questions that Russia will take over during its G20 presidency next year. In general, they should have been resolved in 2012, but we see that we will have to address them during our presidency, because these are complicated issues and because countries have different views of the quotas and the proposals to change the formula for calculating them. We hope to resolve this issue.

In other words, there are many issues on our agenda. The outcome will depend on how we prepare these issues for discussion, so that our countries' leaders will be able to approve relevant recommendations at their meeting in early September and to make balanced decisions on the key issues of global economic development.

Moderator: Thank you, Mr. Siluanov. We will now proceed to questions. Please, raise your hands, introduce yourselves and identify the person to whom you are addressing your question.

Question: This is Ekonomika i Zhizn newspaper. I have a question for Mr Siluanov. But I would be only too happy if Ms Yudaeva would like to answer it. The expert community is discussing the idea of creating what are known as inter-country macroeconomic corridors, belts and development zones. What do you think about this idea in the context of financing these macro-territorial projects? Thank you.

Anton Siluanov: You know, this is really a very important issue. What can I say to elaborate on this issue? For instance, numerous developing countries face major investment shortages. At the same time, these countries are unable to offer serious and major projects which would make it possible to involve substantial investment sources of other countries. And what are long sources of money? These are pension funds and insurance funds, which possess financial assets, but which employ highly conservative investment strategies.

So, the question is how to transform these assets which are located in certain types of countries, and which should be invested in other countries that are in need of them. I believe that our international financial institutions, the World Bank,  the International Bank for Reconstruction and Development (IBRD), which could formulate a list of projects in developing countries, could be of great use here. These projects would be sufficiently large and interesting for serious institutional investors. Given the involvement of these international organisations, money from countries holding these financial assets would be transformed into investment for countries in need of them with the participation and under the patronage of international financial institutions.

This is a very serious issue, and we believe that it could be examined as part of economic growth sources and expanded investment. The World Bank is already drafting these proposals.

Moderator: Thank you. Ms Yudaeva, would you like to add anything?

Ksenia Yudaeva: No, Mr Siluanov has said everything.

Moderator: All, right, next question please. The person in the last row, please take the microphone, introduce yourself and ask your question on the subject of this news conference only.  

Question: This is Nezavisimaya Gazeta. I have two questions, one for Ms Yudaeva and one for the Minister. As you know, the European Union membercountries said a few years ago that they would withdraw from the G20 in order to expand the powers of the EU as an organisation. For instance, this was mentioned by former British Prime Minister Gordon Brown. Is this issue still being discussed, or has it been dropped?

And Mr Siluanov, you said that the improvement of the international financial system is one of the main issues at the moment. What are Russia's ideas regarding the equitable allocation of quotas within the International Monetary Fund? Thank you.

Ksenia Yudaeva: Thank you very much. To be honest, I had not even heard that the United Kingdom had raised the issue of the European Union's withdrawal from the G20. This issue is currently not on the agenda. Certainly, the European Union faces major problems, including the status of the United Kingdom as an EU member-country. But this is another issue, which is not directly linked with the G20. Moreover, a few EU countries are separately included in the G20, as well as the EU as a whole.

Anton Siluanov: The global financial architecture and assigning IMF quotas is a complicated issue. What are we proposing? To determine the quotas, the IMF uses a long and complex formula, which is a weighted average of several measurements, including a country's GDP. The GDP is measured in two ways: based on the nominal value and on purchasing power parity. Other factors are openness and variability. The formula also includes a compression factor.

Apparently if you want to determine your own quota, you need to find an expert on the issue. This is not bad in itself, but on the other hand, the current distribution of IMF quotas does not reflect the recent realities, because we see that emerging economies have greatly advanced of late. They are not the same countries that they were, say, 5-10 years ago, so it is natural that they want to have more influence in the IMF, as well as more influence on financial systems and on decision making in the global financial system.

So we are now aiming to give emerging countries a greater role in the IMF. This is quite obvious to IMF officials as well as to developed countries. Therefore, changing this formula and eventually redistributing the quotas will be a focus of the G20. What are we proposing? We propose simplifying this formula,that is, making it immediately open and understandable, so that GDP will become the crucial factor, that is, its weight should be increased.

The other measurements, such as openness and variability, which depend on the country's current account balance, could be excluded altogether. Other parameters could be minimized in weight or excluded as well. So as I said, we propose using GDP as well as each country's contribution to the global GDP as the crucial measurement. The BRICS countries agree with this, and other countries such as the United States agree as well. European countries, especially smaller ones, have certain concerns, because if we use a GDP-based formula, their quotas will decrease. That is why they are proposing the use of various coefficients and adjustment factors, to save their quotas from drastic change.

So our goal is to reach a compromise and resolve this problem. Allow me to emphasize that we believe GDP and the country's share of the global GDP should be used as priority measurements. We believe this is the most objective parameter.

Moderator: Thank you. Next question, please.

Question: Russia-24 TV Network. I have the following question. The chair country of the G20 has the right to invite other countries as temporary observers. Has Russia already compiled a shortlist of these countries? If not, what countries outside of the G20 do you think Russia would like to invite for this role? This is a question to both speakers.

Ksenia Yudaeva: Thank you very much. This issue is still under discussion but there are certain principles to follow. Some countries, for instance Spain, have a status of permanent observers. Traditionally, two leaders from African countries and some from Asian states take part in the G20meetings. The chair country often invites some of its neighbors as temporary observers. We'll follow these principles when finalizing our list. Obviously, two factors are important here - a fairly broad representation (as I have already said, the G20 is cooperating with countries outside the club for the benefit of all states, rather than just its members). Naturally, we would like to have on the list active countries that are well-versed in the global economy and that can help resolve different issues.

Moderator: Thank you. Mr Siluanov, would you like to go on? Let's switch to the second issue then. Go ahead, please.

Question: Will Russia's prestige in the G20 and other global forums increase now that as a WTO member it is already receiving complaints from the European Union for introducing trade barriers on cars? And I'd like Mr Siluanov to clarify whether the budget directly receives this recycling fee for cars that causes complaints?

Moderator: We are discussing the G20 today, so let's focus all the questions on this.

Ksenia Yudaeva: Let me answer. Obviously, renunciation of protectionist measures is a major issue for the G20. I have already explained that this is linked to memories of the Great Depression. Nonetheless, all countries commit minor violations of these rules and reports on protectionist measures are being conducted. Russia is no exception in this respect but it is not a serious violator either. This will be an operating procedure and I think that this issue will not affect Russia during its presidency of the G20.

I believe it is important to follow the G20 logic on renouncing protectionism. This time the world has avoided the expansion of protectionist measures as was the case 70 years ago and virtually all countries are keen to continue trade liberalization and support the talks on this issue.

Moreover, the G20 is discussing the new format of global trade that has taken shape over the last 20-30 years more actively. As is traditional, we discussed trade in commodities that are wholly produced in different countries, both in theory and practice, including during trade negotiations, then we started talking about trade in services. But now we are more often talking about production-and-marketing chains. All commercial issues are entirely different if we look at them from this angle and the G20 is paying attention to this subject first and foremost.

Anton Siluanov: The G20 is working to reduce protectionism. Virtually all countries are against protectionist measures and I totally share Ms Yudaeva's view. As for the introduced auto recycling fee - the budget has already received about 10 billion roubles from this measure - so don't worry.

Moderator: The girl in the first row. Your question on the subject of our news conference.

Question: This is The Moscow Times. I have two questions for Mr Siluanov, if you please. First, will the organization of the G20 events, including the G20 heads of state meeting in September, require any substantial funding? Have you estimated the possible cost of these events? And, second, which concrete steps does Russia plan to put forward at the G20 summit in order to improve the economic situation and solve the debt problems in Europe?

Anton Siluanov: From the financial point of view, this is a sort of "routine" event for us. We stipulate allocations for holding these kinds of summits, including the APEC-2012 Leaders' Meeting or any other international forums. We have made budget provisions for total amount of about five billion roubles for this purpose. As for the initiatives to improve the debt situation, you know that we want to raise the issue of what is known as framework agreements. What is a framework agreement? Each G20 country has pledged to ensure specific macroeconomic parameters of its economy. These macroeconomic parameters include concepts such as budget deficits and debts. Unfortunately, a number of countries do not abide by these parameters, and we would like to make these framework agreements more meaningful, and we would like international financial organizations, including the International Monetary Fund, to monitor this situation more actively. This would allow international financial organizations to oversee the budget and financial policy issues of countries which face major debt problems more closely.

By the way, what is Europe doing nowadays? They are consolidating their respective monetary-control policies to the greatest possible extent. Consequently, Eurozone countries now coordinate their budget policies rather actively. In our opinion, this is a very important decision and the right one. We believe that all the countries, not only Eurozone, could have been more active over merging their budget-policy stances, using special monitoring programs for those who have high public-debt volumes. Therefore, we will call these countries to adopt programs which will make it possible to reduce their debt burden. It is very important in the context of providing for entrepreneurs and investors to see that this kind of program exists and that there is a list of comprehensible actions which can reduce the volume of debt, say, from 100% to 80% of GDP. Technically speaking, this will take five years. But we should realise what measures will be implemented, and whether this will affect the investment of potential investors concerned. This will prevent us from blindly making investment decisions and we will have an idea how long it will take a particular country to remedy this situation. This is all very important for making these kinds of decisions, thus we will suggest moving in this direction.

Moderator: Next question, please.

Question: This is the Slavyanskiye Novosti newspaper. The press materials say that the representatives of international research centers will meet on December 11, and that participants in these meetings are expected to provide practical recommendations on global management issues. How effective are these meetings, judging by the experience of previous years?  

Ksenia Yudaeva: Thank you very much. This is the second meeting of world's think tanks. The first one was held last year during Mexico's presidency, and it provoked much interest. You know, the G20 thrives on ideas, which are largely generated by the expert community. Consequently, it is very important that we consult the expert community in order to draft the new agenda and better understand the existing problems. The emerging ones, how the existing problems are being tackled, how we could address them additionally, and in what direction we should adjust our policy, or what kind of agenda should be worked out in the future. All this is highly important. As far as we know, the 2012 Think 20 meeting during Mexico's Presidency was quite productive. This year's meeting will involve leading Russian and G20 think tanks, including those specializing in the issues precisely linked with the G20 activities. Therefore we have quite serious expectations from this meeting.

Moderator: Thank you. Yes, please.

Question: Rossiiskaya Gazeta. I would like to address my question to Ksenia Yudaeva, if I may. Ms Yudaeva, you said that the fight against corruption will be among the G20's central topics, which implies that Russia has positive experience in campaigning against corruption and can share such expertise in systemic measures on fighting corruption for the partners' consideration. Could you provide some more details about this?

Ksenia Yudaeva: Thank you very much. As you know, the G20 anti-corruption agenda comprises a new plan that was elaborated a month or two ago during Mexico's chairmanship, and efforts are going to be concentrated on its implementation.

There are two issues that are particularly important from the perspective of Russia's agenda. The first deals with partnership with the business community, since corruption always requires participation of the two parties, and businesspeople certainly represent a very important aspect of it. The second refers to the interaction with the public, particularly civil society. Here, we'll focus attention, among other matters, on educating the public and on cooperation with the population to fight corruption.

Moderator: Thank you. Central stand, back row, your question. On the theme of the conference, please!

Question: Argumenty Nedeli. My first question is: Who will be in charge of organizing the Civil G20 in Russia? Will it in any way resemble the Civil G8 during Russia's G8 Presidency in 2006? And another question: To what extent will Russia take into account the interests of its CIS partners during its G20 chairmanship? Will this issue appear on the agenda of the CIS summit, which will meet in Ashgabat in two days? Thank you.

Ksenia Yudaeva: As far as I remember, Russia initiated this Civil G8 meetings. In the G20 they have already become a regular thing, there are alliances of organizations cooperating with the G20. They mostly deal with issues of development. Some of the Russian civil society organizations collaborate very actively with the G20. Above all, we will continue working with them in our further work. But then, the Public Chamber's interests also must be considered, so we will also join hands with it and with other civil society organizations - but we will certainly give priority to those with whom we have been working for several years. You might know that there is even a Russian-based website on the Civil G20. It's a purely Russian initiative, so long-established partners make most difference to us.

As for the CIS, we will certainly take matters related to the CIS into account in the G20, if not raise them by ourselves, and we will of course consult our partners on those issues.

Moderator: Thank you. Front row please.

Question: Reuters. Concerning labour market and job creation, what practical goals is Russia pursuing? What decisions are expected from the G20? Is it possible to create new jobs when the rate of national economic growth is slowing, and taking into account more urgent problems faced by Europe and the United States?

Ksenia Yudaeva: As you may know, unlike the financial track we have not discussed our quantitative goals in this field so far. There might be sound ideas and perhaps it is worthwhile to consider some future-oriented quantitative targets. We intend to somewhat enhance the meaning of this goal within the course of our Presidency due to the reasons you mentioned, because unemployment, particularly lasting unemployment, is a burning problem in many developed economies, including the European ones. But then, it's also an urgent problem in, say, South Africa.

As for practical steps, the working group and the G20 Labour Ministers will discuss package measures and practices that particular countries, or all countries altogether, could use to combat unemployment, create new jobs and implement structural reforms, including labour market reforms.

Anton Siluanov: Could I add something. The labor market is directly connected with economic growth, isn't it? So, when we address our main problem of the sources of economic growth, if our discussion of it is understandable and practically oriented, and if it leads to the desired results and an acceleration of economic growth, unemployment will be reduced. This is evident, so the two problems are interconnected and should be regarded together.

Ksenia Yudaeva: That's just like the connection between investments and new jobs. That is why we regard all these problems in a package.

Question: Bloomberg Agency. Did I get it right that there are some concrete criteria and indices with regard to the financial market and investment which you are planning to reach or discuss?

Ksenia Yudaeva: Firstly, there is the Working Group on the Framework for Strong, Sustainable, and Balanced Growth, where participants discuss how to assess the situation in different countries, and there is a set of indicators. What did I imply in more concrete terms? You may remember that the Toronto summit, if I am not mistaken, endorsed the decision to halve the budget deficits by 2013. We know that a considerable number of countries, with the exception, by the way, of Russia, have failed to reach this goal, and we will certainly hold discussions on this issue. Properly speaking, the debt subject, as Mr Siluanov has mentioned, is directly linked to this issue. Of course, currently the question is not raised in the manner that all the countries should cut their deficits at a more or less equal pace - more likely it's an individual commitment - but nevertheless concrete indicators are considered quite often within the framework of the financial track.

Moderator: Thank you. Next question, please.

Question: PRIME Agency. Mr Siluanov, you've just said that the budget policy remains among the agenda's priorities. But many participants on numerous occasions, including at the earlier meetings, said that the imbalances in the world economy as well as the budget restriction and public debt reduction goals could be revised and mitigated. Do you think it possible to reduce these targets for the sake of development goals? Thank you.

Anton Siluanov: I have participated in the G20 Finance Ministers meetings for over a year and can say the following. Probably a year ago or even more, there were frequent debates on what was more important - budget consolidation or economic growth - and how cuts in government spending could influence public demand and, accordingly, economic performance. It was argued that countries with large debts should probably not be in a hurry to reduce them and achieve low budget deficits; probably it should be better up to the developing markets with their balance-of-payments and budget surpluses to increase public demand and thereby help pull up the world economy. But there have been fewer arguments of this sort recently because it is quite clear for everyone that ultimately no economic growth is possible - for reasons that I have mentioned - unless we bring down the level of debts.

This is why I consider the main task for the countries with a high level of debt to have a debt reduction program. We can only speak about a revival of economic growth with a low level of debt. The issue for the budget is, therefore, in how to balance your budget: what amount of spending you can afford and whether to increase the tax burden or not?

Incidentally, spending cuts, or the so-called budget consolidation, are not always equally effective. What I mean is that there are different kinds of spending. You can cut spending on infrastructure and innovations, and this will really affect the economic growth. But you can also cut, for example, ineffective social benefits and replace them with a targeted support... This will have a low-key effect on economic growth. So, this type of budget consolidation is of great importance as well.

I would rather interpret your question differently: Can we possibly mitigate the austerity requirements? No, we can't! The majority of the advanced countries, even those with a high level of debt, recognize the need for having austerity programs. It is more of a political issue because heads of state have to push these programs through. This is where great skill is needed. Every government must explain to the public that they have to get rid of debt liabilities that have probably been accumulated during earlier governments' time in office. They have been living beyond their means: it is not right and sooner or later one will have to pay the bill. The key is to have a program and keep up the pace of reductions. The investors will regain faith in this or that country and resume investments only if they understand such a program. Thank you.

Ksenia Yudaeva: I'd like to add something, if I may. The term "imbalances" may mean different things to different people. The classical meaning is a trade imbalance. For example, there is a considerable imbalance in U.S.-China trade with a huge surplus and accumulation of reserves in China's case and, accordingly, a large deficit and public debt growth in the United States. China, incidentally, is a debtholder for the U.S. It's a classic global imbalance of the 2000s. There is similar deep-rooted imblance between Germany and the countries of the European periphery. This is the first interpretation of the problem.

The second type of understanding refers to large state debts. Quite often, however, they are not so much state debts as private debts that risk to become state debts in certain countries. There are several cases of this kind. Spain is one. Its state debt is not very large, but there are huge problems in the banking system, and for that reason the EU has paid so much attention to the creation of a banking union. They also consider how to administer aid to banks in different countries in connection with the Spanish problem. Another case in point is Ireland: it had a small debt of its own, but its entire banking system went bankrupt, with the state debt surging dramatically after aid was provided for the banks.

When people say that the problem of imbalances has become less acute, most often they mean precisely the trade imbalances. In fact, the U.S. deficit and the Chinese surplus have indeed been reduced. The adjustment is somewhat slower in Europe but it is in evidence, including as a result of the policies pursued by the peripheral countries.

But, as all experts point out, the problem is that this adjustment of imbalances has resulted from an economic downturn, not economic growth. What I mean is that structural changes which would enable these countries to grow in a more balanced manner are a way off or have just got started. At any rate, we know that many industrial companies are coming back to the United States because of the growing costs of production in Asia. Besides, America has become a major producer of cheap gas and is emerging as a major producer of cheap oil. So, certain industries are on their way home and this is spurring a rebalance. So far, however, rebalancing has mostly sprung from the economic recession, therefore, this subject will remain to be the focus of economic policies.

As far as the debt problem is concerned, I would support Mr Siluanov in his view that debt reduction policy and economic growth policy are two related things. We cannot state debt reduction policy opposing to economic growth policy for two reasons. Firstly, debt reduction generates confidence and leads to balanced economic growth. Secondly, in the course pursuing debt and deficit reductions, you can choose measures that either sustain economic growth or at any rate affect it in the least degree. It is a highly important matter that, among other things, has very much to do with how skillfully a budget policy is implemented.

Moderator: Thank you. Are there more questions? I can't see your hands. Obviously the journalists have used up their ammunition stocks. It only remains for me to thank our guests for this interesting discussion. Thank you and goodbye! Come again!