New York Times - 09/07/98
By MICHAEL WINES
MOSCOW -- On the night before Russia's parliament was to vote again on whether he becomes prime minister, Viktor Chernomyrdin warned on national television Sunday that the nation has entered a fiscal
nosedive and that further political squabbling could lead to social chaos.
Chernomyrdin also said the economic situation was so dire that "no classical anti-crisis measures apply," an assessment that seemed crafted to defend seemingly contradictory parts of a fiscal platform
he outlined on Friday.
"We've already gone into such a tailspin that straightforward methods will not provide us with a way out," he said.
His platform calls for printing billions of rubles to pay years of unpaid wages and pensions and to save failing banks, followed only months later by strict controls on the printing of money and renewed efforts to streamline the tax system and cut spending.
Some critics quickly called the program a party-now, pay-later solution to Russia's problems and warned that it could lead to hyperinflation. By one measure, hyperinflation has already arrived: the ruble was trading at nearly 19 to the dollar at some Moscow shops on Sunday, nearly two rubles above Friday's rate and more than three times the rate just a month ago.
Chernomyrdin's 90-minute appearance on an evening news interview program was timed to have the most influence on the lower house of the parliament, the Duma, which is scheduled to vote on Chernomyrdin's nomination Monday.
The Duma decisively rejected the nomination last Monday, with the dominant Communist Party joining reformers and nationalists in dooming Chernomyrdin. The Communists in particular want a greater say in
the new government, including the choice of at least three Cabinet ministers and a hand in setting economic policy.
On Sunday night, Chernomyrdin and the acting deputy prime minister, Boris Fyodorov, fleshed out parts of the economic platform that they had described in general terms on Friday.
Chernomyrdin said the government intends to print money to partially compensate civil servants, soldiers and defense workers for billions of rubles in wages and pensions that have gone unpaid in recent years.
The size and timing of those payments were left unclear, but Chernomyrdin said they would not be indexed for inflation.
Later, the government intends to double the gold and hard-currency reserves in the Central Bank -- bringing them roughly back to their level at mid-summer -- as part of an effort to integrate Russia into the world financial system.
He also said he intends to propose a 50 percent cut in the profits tax as a way to stimulate business activity. "The profit tax should be halved immediately," he said. "The taxation system should be
simplified and, simultaneously, tax collection seriously improved."
In a separate television appearance, Fyodorov said the government should again make the U.S. dollar legal tender in Russia, a status it enjoyed following the collapse of Communism. The proposal would tie
the value of the ruble to the dollar, much as in so-called currency boards that have been employed to curb inflation in countries such as Argentina and Bulgaria.
No one knows for certain, but by almost every estimate there are far more dollars than rubles in Russia, mostly salted away in households and businesses.
Fyodorov said by legalizing the dollar "all that money currently stored under mattresses will come into circulation and be freely exchanged."
"We have to acknowledge that there is a second money supply in Russia," Fyodorov said. "Under the system we are proposing today, if anyone wants to pay in dollars, let him do so. But if someone does
not want to accept rubles, it cannot be allowed."
In his television appearance, Chernomyrdin said it was most important to move quickly to select a new leader for the country before inflation and economic collapse lead to social disorder.
"Can anyone imagine a factory of whatever size operating without a leader, without clear instructions for two weeks?" he asked. "Here we have Russia, an entire country, with no leader for two weeks."
Further delay, he said, risks a revolt that would "wipe away everyone, wipe the power that exists today. And then someone would want to enter the Kremlin on a white horse. This should not be permitted."
Should the Duma reject Chernomyrdin again on Monday, his nomination would be entitled to one more vote, after which President Boris Yeltsin would be free to dissolve the parliament. It was reported Sunday that the Communists' leader in the Duma, Gennadi Zyuganov, had prepared a list of five men acceptable to his party as nominees for prime minister -- a list topped by the mayor of Moscow, Yuri Luzhkov.
But there is some doubt over whether that roster will be needed. Chernomyrdin's prospects brightened late Friday when the upper house of parliament, the Federation Council, voted overwhelmingly to support
his nomination. And on Sunday the leader of the ultranationalist Liberal Democrats, Vladimir Zhirinovsky, said he was certain that Chernomyrdin would win approval either on Monday or in the third vote.
All but one Liberal Democrat abstained from the first vote, but Zhirinovsky said his bloc, the third-largest in the Duma, would support Chernomyrdin on Monday. Most members of the fourth-largest bloc, the reform-minded Yabloko Party, are expected to vote against Chernomyrdin on the grounds that his program is not strong enough to work.
Yabloko's leader, the Duma legislator Grigory Yavlinsky, declined to say whether he thought Chernomyrdin would be confirmed. "In Russia, only an idiot would make predictions," he said. |
