Russia demands EU action before helping eurozone

10th October 2011, Comments 0 comments

Russia said Monday it would like to see a firm rescue plan in place for Europe before committing more of its petrodollars to any debt purchase programme designed at helping the eurozone.

President Dmitry Medvedev's top economic adviser said after talks with Spanish Finance Minister Elena Salgado that the two sides discussed Russia's participation in further bond purchases.

But Kremlin aide Arkady Dvorkovich heaped further pressure on EU giants France and Germany by stressing Russia's interest in seeing the details before committing itself to a rescue.

"We expect the European countries to announce a concrete, clear crisis exit strategy," news agencies quoted Arkady Dvorkovich as saying.

"If support from Russia and other BRICS (Brazil, India, China and South Africa) nations is needed within the framework of this strategy, we are ready to render such support," Dvorkovich said.

Economists said Dvorkovich was most likely referring to short-term Spanish debt of relatively low risk -- the same type of purchases that helped Russia diversify its foreign reserves during the 2008 economic decline.

There was no immediate comment from the Spanish minister and Dvorkovich made clear that "until such a strategy is announced, it is premature to talk about" Russia's involvement.

Russia is the envy of many EU nations with a government debt of less than 10 percent of gross domestic product and and estimated $500 billion in gold and hard currency reserves.

This strength however is offset by an extreme vulnerability to global flights for safety that recently saw both the ruble and the local exchanges slide to 2009 lows.

Dvorkovich's call for European action came after German Chancellor Angela Merkel and French President Nicolas Sarkozy gave themselves three more weeks Sunday to come up with a concerted response to the eurozone crisis.

Berlin and Paris reportedly differ over how to go about recapitalising banks that are facing massive losses from sovereign debt holdings in deeply troubled nations such as Greece but Sarkozy and Merkel insisted Sunday that there were no differences between them.

Dvorkovich also made clear that Russia had no intention of supporting a financial transaction tax proposed by European Commission president Jose Manuel Barroso.

The plan has been slammed as ineffective by critics who argue that traders would simply avoid the added cost by using other global markets.

"We are not against France and Germany introducing this tax. But we will not be supporting collective decisions that include Russia," Medvedev's aide said.

Russia has previously signalled a readiness to expand its eurozone debt holdings in nations with firmer financial standing.

The ousted finance minister Alexei Kudrin said at the end of September that Russia would stay away from the bonds of risky countries such as Greece while "slowly growing" its holdings in more stable EU countries.

Kudrin was ousted as finance minister after Medvedev announced plans to cede his presidential seat to Prime Minister Vladimir Putin.

But he still serves as Russia's representative to some world bodies and may yet play a role in Putin's new Kremlin administration next year. He was also present at Dvorkovich's talks with Salgado.

Dvorkovich for his part said last week that he expected to join Medvedev's new government after Putin's expected return to the Kremlin in March presidential polls.

© 2011 AFP

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