IMF chief warns Russia against complacency

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IMF chief Christine Lagarde on Monday warned Russia against complacency given the budget crises in eurozone states, saying the Russian economy was still vulnerable due to domestic weaknesses.

Russia has proudly boasted that its budget deficit and public debt are far lower than most EU countries and it is even in a position to help the eurozone out of trouble, along with other big emerging economies like China.

After meeting President Dmitry Medvedev on her first visit to Russia since taking office, Lagarde described Russia as a "survivor" but said it had to address its fiscal situation and over reliance on energy exports.

"Russia survived many crises. Russia is a survivor in many ways but it still has some important vulnerabilities," she said in comments to students at the Russian Finance Ministry State University.

She warned against high spending ahead of parliamentary elections later this year and a presidential poll in 2012, and reaffirmed warnings Russia needed to diversify its economy away from oil and gas exports.

"A key priority is to rebuild fiscal policy and it must diversify its resources," she said. "Public spending is not healthy, especially in the time of election."

"What Russia needs is a higher, more sustainable growth."

Lagarde and Medvedev earlier met for talks just days after attending a G20 economic summit in Cannes, France last week.

"Our economies in the world are so bound to each other and it's a time for bold collective action," Lagarde said.

"I count on Russia to continue to play this bridge role between Europe and Asia," she added.

Moscow has been looking to increase its profile within the International Monetary Fund (IMF) and has said it was ready to contribute to an EU bailout package through the global financial institution.

The Kremlin has said Russia's contribution being negotiated with the IMF would be limited to $10 billion. By comparison, China has dangled the possibility of contributing $100 billion to Europe's bailout fund.

Medvedev has repeatedly said the world's largest emerging economies like Russia, Brazil, China and India should have a greater say at the IMF and that countries should be represented in proportion to the strength of their economies.

Following talks in Russia, the IMF chief will visit China and Japan. All three countries have expressed interest in providing financial assistance to Europe, under the IMF's guide or oversight.

Lagarde has been criss-crossing the Atlantic on trips to Europe since taking the IMF helm in July, participating in negotiations on the eurozone debt crisis and G20 meetings organized by France.

With Russia's 18-year bid to join the World Trade Organization apparently enjoying a decisive breakthrough last week, Lagarde said membership of the global trade body was a strong signal, even if it would not bring radical change in itself.

"I am very pleased that Russia is about to join the WTO," she said.

"There are not massive gains to obtain for Russia but there is a very vibrant and significant message to the international community that Russia satisfies the standards of the WTO."


© 2011 AFP

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