tv Prime Interest RT October 26, 2013 12:29am-1:01am EDT
uncomfortable and given the external environment so terrible they're waiting for the upswing before they commit themselves to you know building new production oil or investing in some new facility you saw you weren't doing when the government a few months ago decided to go it will use during austerity budget cuts instead of stimuli they knew this was going to happen to the economy it shouldn't surprise anyone that the economy would slow down in and industrial production is zero right now absolutely i mean already talked about industrial production cap ex over the last year is down four percent which is significant so the government throwing on austerity on top of that it's no surprise that the economy does it take the pain now for. growth later i mean is this the strategy i think i think the external factors of being brutal on this has been indicating europe in europe and the recession for many many quarters are just just coming starting to come out fifty percent of russia's exports are related to europe so i mean that external factor has been significant i think russia decided that it would while the rest of the
world was taking pain it may as well join in ok but yeah they have the the opportunity to do so well the company space i mean if you it seems perverse to put into place now when the growth is so low but the slowdown hasn't actually affected the people in so much is people are cutting rates in the west because they've got twenty thirty in youth fifty percent unemployment in russia we've got twenty year lows there's full employment more of a people's incomes continue to rise and so for the most of the older a number for this quarter that is is positive is disposable income continues to be on the increase so very small so the rest of europe is suffering and you know seeing these riots and protests because the people are hurting and in russia the kremlin has made the decision the people are actually doing fine for now and so we should get on with the business of doing the you know these these reforms and changes to the financial system getting in from. because what they're doing is
they're betting on an organic recovery starting next year rather than trying to engineer a growth recovery now and you can debate whether that's wise but it's quite a break something to do this is what the big debate was during the summer and i think this is what confused a lot of people if you walked in there in the state sector and for investors and just for businesses in general i mean the we had first six months we had a government policy of stimulating the economy through spending and all of a sudden it came to a screeching halt and then you got to reverse and i think this is one of the things that of wait and see because we're going to see how this plays out as ben was saying you know i mean the. g.d.p. growth is about one point three one point four percent over the year it's significantly the vast majority still from the consumer. still being the consumer spending which has come from real wage growth which has been significant within within the russian economy in contrast that with across western europe where you know wages are still often off from below two thousand and eight levels in real life russia is coming to the point. where they're kind of running out of time in so
much as even the consumption is starting to slow down and retail turnover is slowing although it's still a driver but it means that the model for growth going forward is changing and it has been you know people say russia is a petro commie it's not it's a consumer story because of these hundred forty three million people who buying things they never had they do like to shop and they still have lots of shopping left to do. going forward the for the economic growth story it's now going to be about investment and encouraging investment and putting the things in place which is lower interest rates which is confidence which is less bureaucracy these are all the things and these are big tough issues to deal with and you know things are being done about that but we'll have to see how it goes i mean you know over the last couple of years the word austerity is a dirty word in europe and a lot of people have come to conclusion that the kind of austerity that we saw play out in greece and some of the other big. countries was really the wrong strategy
that you have to find the balance between stimulus and cutting budgets but russia is in a peculiar situation to go down the austerity path is because it virtually has no debt absolutely i mean it is that the rationale behind it to go through the pain now and get real quality growth not financial growth not financial markets but i mean real economic growth effects the real economy the interest of the everybody became keynesian for a very short period of time. in russia it's we have we're not really in a keynesian situation we need there's significant cap ex needed the significant investment but this really is structural reform that if that if that was adopted now that would really significantly improve growth for students refused to go down the path of structural reform during times of austerity i mean you know people would make the argument you know it's not a good idea to change the wheels of your tire and the muffler and every else everything else in your car while you're going seventy miles an hour i mean they did it in the one thousand eight. hundred signatures social and economic problems
it example exact kind of rates to a very great degree any problems that exist with a quarterly but at the same time if you are going to see it is much better to sort of go to the doctor and get everything done and that's right so i guess there's no there's no real good time or a bad time you just have to do it well put it this way typically countries if they don't need to do the reform they won't and for most of the last ten years russia didn't need to because they had buckets of money suddenly they need to do the reform and you could argue with you know it's a bad time to do it but the thing is they're being forced to do it because now there's no way out of this paper bag unless you do the structural reform and like i said before russia is in this great position because they can effectively experiment with doing all of this reform and if it doesn't work they can simply turn on the spendings because they're unique in the world with that because they can spend their reserves and they can borrow they have massive borrowing capacity which they haven't tapped. and so they can just spend their way out of anything
which is the result we have also we have the double whammy here for russia because and i think both of us remember the one nine hundred ninety s. when russia was broke it was very much a debtor nation and then we saw the financial crisis of two thousand and eight two thousand and nine that's still with us now and the man in the kremlin a lot of mir putin remembers both very very well he's very skittish about going to international markets for credits right now because he sees it as a national security issue yeah i mean deficits in general are anathema to the government and they're going to avoid it at all costs and consequently we've seen all these sort of. short term budgies you know the duct tape economic duct tape which is things like freezing tariffs and freezing with state employees wage growth because they want to avoid that so they're trying to you know we've between on the one hand doing the reforms in the austerity and on the other hand creating some money in the budget in order to avoid a deficit to avoid borrowing to see if they can get to the point where the rest of
the world picks up and leaves russia with it and as i say the consensus amongst the consumer the economists and the i.m.f. from next year that there will be a recovery that we're through the pits at the root of the crisis yeah completist we at the bottom of the trough. i think why it's very very difficult to pick bottoms to read it is another one further down but i think overall everybody i mean the u.s. he's on stall speed but it's recovering and i call it the most viral recovery so it's it's not phosphorous but it's not that i agree with ben but i mean but i don't i don't see i maybe that's the consensus among economists but i mean the consensus among economists this time last year was that things were going to be better and it hasn't been proven true what is it the economists predicted nine out of the last two recessions. i mean is that i mean the bets is that there's going to be a general recovery that really is visible from next year and russia will be able to benefit there in an organic way which means they can do the austerity things now
without having to do this official stimulus i think it's a good bet i mean this is what you know people are looking at and that's what you plan for and as i say they've got all these reserve options that they're not using that they can put into place if there's another crisis meltdown problems if it was slower than expected and it's already starting to look like it is going to go slower than expected some to russia miscalculated or underestimated its impact it's how it's impacted by the rest of the world because we do see this aversion to going to the international credit markets here but still as you pointed out the first thing she said on this program is that you know the the crisis in europe continues to really sap the energies of this economy i think i think all governments around the world like to think of themselves as truly independent and able to influence their own affairs but the state of the financial markets and of the global globalization of the world as it is countries are completely intertwined i think it's becoming less and less one sovereign even if you wanted to reverse absolutely
i mean you know each sovereign nation would like to believe they can plot their own little court path and their own planning spending measures or certain measures will see them through in their own way but it's too intertwined it's just impossible if the u.s. . i don't it's that next thanks for bring it will have so we're going to talk about that when we come back after a short break we'll continue our discussion on russia's economy stay with r.t. . if you don't know if you don't per car as the response to ruse. everyone in my life that i cared about their goal much and then. i came to skin well.
i was a national champion in track and field and also i was able to go and qualify for the olympic games. to experiment with other drugs i had lost all the financial means that i. was really on the street. black market can. pay a little break. here. drugs some of the sixteen percent imports came from illegal fishing. in the european union is ironically taking fish from some of the poorest nations on earth so this
is a very serious and very urgent problem that needs immediate international action. give birth to a territorial waters if they fish they load the fish into the ships and leave for europe. to day illegal fishing just taking the bread out of our mouths. one hundred days remaining. one hundred days a flake. cheap. meat speed told language. programs and documentaries in arabic it's all here on. reporting from the world's hot spots the v.o.i.p.
interviews intriguing stories for you to. see in trying. to find out more visit our big teeth dog. welcome back to on the money with the business of russia's business i'm peter lavelle to remind you we're talking about russia in the global economy all right so i mean you ended the first half of the program talking about what was going on in washington well it's spread this out a little bit here ok i think we all the consensus was you're going to get through it in washington they have to raise the debt levels and they have to go and get a budget for the country but there was a lot of political scrambling for that a lot of political theater as well. but aren't isn't the world getting old more and more tired of this circus because of the dollar and how were governments like
russia china bric countries the emerging world i mean looking at this because my last question to you in the first half of the program is trying to insulate yourself from these problems but as always you have indecision in the united states and how it's going to deal with its economy and we don't know what how damaged obama politically will be moving forward when it comes to economic issues and what countries like russia think about that i mean the u.s. politics politics of a lot of the last month has been like an episode of the west wing and i think they quite enjoy it. china. coming out in public and saying you know look make sure you look after our investments even if that is it wasn't a senior official said of the world it's time for the world to d. americanize itself yeah china china for a long time actually for a while now has been trying to switch into non-dollar assets so it's been seen a significant increase in its euro euro euro assets whenever it can go into things it's been going to euro shack losses and things like that being significantly a rise of gold has been significantly impacted by many bric countries
a significant increase in their purchases so when governments across the world have been trying to deal dollar rise issues but when it is the global global currency it's rather hard. so yeah they can they can talk about wanting to don't arise and reduce their. holdings of dollar assets but it's it's almost impossible you know i mean if you could start by especially when you talk about the chinese reserves you can still bring up entire countries are going to say the chinese in the process of buying up a great deal of africa but that's not what t. bills is that it's with other assets i mean they're not turning these into the united states and going into africa they're stuck with these things for them on the other part of the nation because of this i mean even before this. recent brouhaha in washington there was a trend of wanting to detail the rise and to do. dresses and russia china has been on acquisition spree investing money not just in africa where i think they actually
cover every single country no i want i want my blackberry apparently but more recently in central asia i mean the president was just down there last month and a whole string of deals you know he was called the chinese father christmas handing out money and deals to everyone which is sensible but the crisis in washington over the ceiling highlights the world's attitude is changing to the dollar because you bought those bills because they were the safest bets in the world and even though the scene has been raised and full of virtue if you start messing around with that reputation because when you buy when you buy a billion buy in confidence aren't you not it's not necessarily the you know it's our you it's confidence in the future and this is what's really been damaged here is i don't think anyone holding in to you bill worried that the u.s. government wasn't going to honor it ok but i think what people are beginning to worry through time is the level of competence that one day might not be able to not that he doesn't want to because in this in this case it was wanting to they could
raise the debt ceiling if they want but in the future the near future mid-term maybe they won't be able to you know i mean it's a very expensive insurance policy it's very negative real right so i am not but that the confidence level in the greenback is. historically i would say dropping and dropping and bends right countries like china just by buying real assets of a hedge against a hedge against the dollar is to go to go off and like i said. in russia you typically buy a car washing machine apartment because you're sure at the end of the crisis no matter where the currency is those things have real value and whatever the new valuation is you can swap it back for money at whatever it is i got my wrist watch and two thousand eight thousand or something let's talk about the euro crisis here it was keep it short because it's the same story over and over and over again merkel has been reelected in. really inserted herself again i mean what's the direction of the euro here because again you started out with the program russia has to keep an eye on it it has no choice but i mean europe is going to be the mass
for a while merkel being reelected is very positive news for europe. obviously to form a coalition yet but that'll do that'll get done i still worry for certain european states which i indicated earlier you know have significant levels of youth unemployment there's a generation of talent so europe's got a lot of healing to do. oh no gentlemen i mean healing yes but ben is it just another big bubble which is a big bubble i think it like with quantitative easing i mean when you see this really all too easy credit in the world right there in the united states it's a bubble it's a misguided policy i mean the whole point of easing in florence is basically throwing money at a problem suppose it down the road so that you don't have to deal with it and the basic problem is to deal with the debts and have it because you know during the crisis the governments took a lot of that bad bank and just put it all on the national balance sheets and
countries don't you know go bankrupt i mean they can default there but they don't go bankrupt and now the issue is how to get rid of it and unfortunately that is continuing to climb them across all of europe i think and germany was the only country in the last six months that actually reduced its debt and even that was by point three percent everybody else has seen it climb and it's up at around ninety percent of g.d.p. which is unsustainable or at least that's the red line americans one hundred four and exonerates you know the dollar is the dollar and the euro is the euro so it needs to be dealt with and nobody's dealing with it and unfortunately you've got this political problem. needs to get reelected and the significant thing with merkel is that the elections have done so now they can actually turn to dealing with the problems and as i said before germany is actually one of the only countries major countries in europe that actually is dealing with the problem whereas the others are still struggling and losing the fight which means that this whole european soccer is going to continue for the foreseeable little reelection of
merkel merkel is she going to go help in the southern tier. i diet i seriously doubt whether she'll be sure what you do and if you can what do you do then why me look at island i mean island was one of the first countries to stop putting in austerity it was significant budget cuts and was one obviously the first country bailed out in europe it's come back you know it like that almost the celtic tiger is back germany i mean germany went through structural reforms through the roof with chancellor cope. germany is always one step ahead of the rest of europe and europe needs to follow along and it's one of things that. labor reforms they did ahead of this crisis and again we were talking about russia picking a bad time to reform europe's even a worse position because they don't have this buffer of money or borrowing and they need to do the reforms that germany has actually already put in place under schroeder. which is one of the reasons why germany is doing well but it's not just germany the periphery states also needs to tackle these problems and there doesn't
seem to be much backbone to do it's you know their little nickel will exactly they're looking to germany for a hand in the end it's to throw money at the problem but it goes away so you get through the election so like it starts you know that's the big problem here because merkel was elected not to do such a thing you know absolutely i like i fundamentally believe that you all should stick to what i think we will see still significant problems in the pressure of europe i think that you know the heartland of europe northern europe asia is robust and it's been chugging along quite nicely you know its growth its growth rates are at play there are practical thing they're doing at the moment is to put in this is a banking union and that's that's the first. that and really the way out of this problem i think is to create a federated union. where you start mixing school but penn and most people joined the european union is that what they wanted to join maybe not and of course it's going to be incredibly difficult and i'm not saying there's going to be a federation but because i think that's that's obviously the solution to this
problem but that's a rational intellectual. i think your solution but it's not a good it's not a political solution that's tenable you know if you don't you'll have you'll have states pulling out of the. euro land if that happens i mean obviously the u.k. has already said it hold a referendum and the feeling within my home country has you know that it will mean if we're not going for it it's solution you know a viable solution that would work that we're just left with muddle through what i think i mean like all currency unionists that they haven't historically lasted for a long period of time and i worry i worry that you are still see significant danger but there because the reason of your currency unions work if it's based on economy not just politics sort of change gears we're almost out of time where is oil going . well the consensus there again is given the instability in the middle east although we have this whole thing with saudi arabia right now in the interlining story right there is petro dollars and i think this is what's giving
a lot of jitters to put the predictions i've seen are talking about you know for the foreseeable future five years one hundred twenty up to maybe one hundred fifty driven partly by the instability in the middle east but also the fact that demand continues to rise and that's a function of the merging markets emerging there i won't but i will counter that by saying obviously you know shuttle is coming much more on stream us becoming energy independent is significant but the use of. hydrocarbons in emerging markets is still rocketing high of rocketing north i mean obviously but for me i would say that the demand will be countered by the share a little eventually we're going to start getting around to people talking about you know trying to reduce significant use even even in emerging markets but that's where while we wait off there if it hits one seventy that's about another seven percent tax on business one fifth at significant impact on energy prices and now obviously the fact that for russia's reform project but probably not like i said before if they have too much money they want to the reforms and the beauty of this
situation is that they have to and they are making an effort at least saying the right things and i've started various programs so i actually always said that russia would be much better off with. us because then it would become a normal country you know it wouldn't have all these buckets of money and they would actually have to run their country you know efficiently as a business instead of as a bank the money to have it once it or can get it. capital flight this year not to good. capital flight an issue for russia a lot of the time i remember within the capital flight number is always a russian investment in overseas companies which is often ignored i mean you know it sits there is more than the same thing so obviously yes there's a large number of very wealthy russians moving capital abroad but capital flight. historically it will continue to be the same way until the reforms and also in the resolution only on account tax and things like this and people feel comfortable
with maintaining a fit within russia one year from now ben we're going to be sitting with the g.d.p. growth ten seconds. hopefully people think it was like you should do that then we'll be looking at sort of much stronger three percent growth slowing of capital flight which is the flip side right i mean have you both on a year from now want to see for production work out many thanks to our guests today and thanks to our viewers for watching us here on on the money see you next time they are. great hopes for freedom and democracy. substituted by great to see.
what was expected to be a blessing to the country. turned out to be its course. georgia the story of a disappointment. their own family be yours you don't know if you know her car they are no response to really. i lost every one in my life that i cared about their goal but now that i can escape well. i was set national champion in track and field and also was able to go and qualify for the olympic games. you know one nine
hundred eighty eight i started to experiment with other drugs i had lost all the financial means that i. was really on the street. black large brown kids. who don't break. the tree. there did whatever they want in syria these days and even the obama administration can do nothing to rein the saudis in and i think the sad answer is that the united states doesn't have the power that it once had it doesn't have the leverage that it wants tries to work through allies through international organizations and occasionally on its own and deal with the court of public opinion that the best of
america can but there are there is a lot in the toolbox right now they're not many tools list. well told you my language or what i will only react to situations i have read the reports so i'm likely to push the know i will leave them to the state department to comment on your latter point of the month to say to mr kerry a car is on the docket no. no no no more weasel words when you made a direct question me prepared for a change when you have to punch be ready for a battle freedom of speech and little down to freedom to cross. the fact that the military practiced it any given moment. people you
know doing false arrests which is basically like like a normal arrest that you actually drag somebody out of his house in the middle of the night don't know difference is that the person that you are arresting is not really wanted for anything this is just for practice for training the soldiers now obviously one of the reasons that it's being done even older to actually train which is problematic but i would say that if you look at the whole. testimony hundreds of soldiers you will see that the main mission. is to tear the palestinian society as a whole not just the gunmen men women and children everybody needs to be afraid of you because that creates effective control over the palestinian population. one hundred days remaining.
days of. my dreams. but he couldn't hold on to their. teacher and now she runs her own factory. there's no alcohol no smoking and even coffee is forbidden they worship. will he be. approximately sixteen percent imports came from illegal fishing. the european union is ironically taking fish from some of the poorest nations on earth
so this is a very serious and very urgent problem that needs immediate international action. to ensure territorial waters they fish they load the fish on to the ships and leave . the. illegal fishing you're taking the bread out of our mouths. full of wonderful. new knowledge face. pleasure to have you with us today.
british intelligence is experiencing it it's good to cover up details of mass surveillance operations fearing legal action full i was stepping boundaries. the cost of membership being forced to cough up a staggering twenty seven billion. comply with many regulations. and. some major. turkey turns away from its allies and seeking a missile defense deal with china.