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Analyst: The Methods Moscow has Chosen to Fight Economic Crisis Will Only Deepen It

on Wed Jul 29, 2015 10:35 am
The Russian government’s decision to try to balance the budget on the backs of the population by cutting pensions and reducing social spending has had the effect of cutting consumer demand at precisely the time when such demand could play a positive role in getting the Russian economy out of its slump.

By Paul Goble* for “Windows on Eurasia”:

July 28 – Because Moscow cannot cut spending on oil and gas as that sector is too closely tied to Putin, cannot cut spending on defense because of the military buildup, and cannot attract outside investment because of sanctions, the Kremlin is putting all the burden on the population, reducing effective demand, and making the situation even worse.

Indeed, Aleksey Mikhaylov says this week, by cutting social spending and especially pensions, the regime is dousing the fire with gasoline and “only deepening the crisis because the main problem of the current crisis is the decline of consumer and investment demand. And [these measures] reduce consumer demand” (profile.ru/rossiya/item/98652-za-vse-zaplatit-narod).

As one would expect, Vladimir Putin and his government have sought to put the best face on things, arguing that the situation could have become far worse than it is. That may be so, but on the horizon are three external developments and a slew of internal ones that are certain to make the situation much worse and soon.

The resolution of the Iranian crisis has already sent oil prices down and the end of the embargo will send them down more. The Federal Reserve Bank of the US will begin to raise interest rates in September drawing more capital to America. And Greece will probably leave the euro zone, forcing a further devaluation of Russia’s hard currency holdings.

But these “’unexpected developments’” pale in comparison with the problems at home, the commentator suggests. The government has been playing games with statistics to make things look less bad, like not including Crimea in terms of costs but including it in terms of income.

Moreover, the Russian government’s decision to try to balance the budget on the backs of the population by cutting pensions and reducing social spending has had the effect of cutting consumer demand at precisely the time when such demand could play a positive role in getting the Russian economy out of its slump...................

To read further go to this link: ukrainebusiness.com.ua

Russians, be ready for further economic suffering. Again! Time to take your country back for your prosperity, not the prosperity of a selected few.


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