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To: goldsnow who wrote (19278)	9/19/1998 12:18:00 AM
From: Alex	Respond to of 116762

Russia to Print Money to Pay Debts when the government does it, it's not called counterfeiting MOSCOW, Sept 17 [(Reuters)] - Russia's central bank, tackling the financial crisis even before Prime Minister Yevgeny Primakov has finished forming a government, said on Thursday it would print money to pay off state debts and bail out banks. The move appeared to confirm fears that had already sent the rouble into a new dive as savers worried that Primakov, a compromise choice between President Boris Yeltsin and the Communists, would re-ignite rampant inflation in his attempts to temper market reforms with aid for local industry and welfare. Yeltsin seemed set to drag out the process of completing the government line-up when he said he might need up to another week to study Primakov's proposals, especially for finance minister. But, after nearly a month without a full cabinet following Yeltsin's dismissal of premier Sergei Kiriyenko, anxious allies and creditors are arriving in Moscow seeking assurances that the world's second nuclear power is coping with its latest crisis. German Foreign Minister Klaus Kinkel, who met Primakov with British and Austrian ministers forming the EU's troika, said he was reassured. "There's no return to the past," he said. U.S. Deputy Treasury Secretary Lawrence Summers told Congress that Russia faced a return of ruinous inflation -- which hit four digits in 1992 -- if it did not bite the bullet and rein in spending and deal with weaknesses in its banks. "They must resist pressures to spend and lend which will doom the economy to another bout of high, perhaps hyperinflation," he said in prepared remarks. Yet while centrist new First Deputy Prime Minister Alexander Shokhin hit out at predictions of new monetary emission, that was exactly what the central bank, now headed again by Soviet-era chief Viktor Gerashchenko, seemed to be doing. "Emission, of course, emission," the bank's First Deputy Chairman Andrei Kozlov told Reuters when asked how the central bank planned to fund a promise to buy back for cash virtually worthless government debt from Russian banks. The dilemma facing Primakov and his Communist first deputy Yuri Maslyukov, a former Soviet planning chief, is whether to maintain austerity that kept inflation low but left millions of Russians, from pensioners to submarine commanders, with barely any money at all or to print money of diminishing value. "People want real money to cover what they are owed, not sweet wrappers," defence analyst Alexander Golts said of Yeltsin's promise on Thursday to pay off army wage arrears. "If they are given money that's not worth anything they will feel cheated just the same." Kiriyenko's administration froze payments on some $40 billion of government debt exactly a month ago, on August 17, virtually admitting the Russian state had gone bankrupt. Under the central bank scheme, local commercial banks can use some of their obligatory reserves at the central bank to make payments. That would ease sclerosis in the banking system that has left many savers' accounts frozen and importers unable to replenish the shelves of big city stores. But the offer to buy back bills only from Russian banks brought criticism from Western institutions facing big losses. "They've openly announced they're going to discriminate in favour of Russian banks," said Stuart Brown, an analyst at Banque Paribas in London. "It also looks like the first stages of a bailout of banks who probably shouldn't be bailed out." Boris Nemtsov, a liberal who was deputy prime minister until last month accused his successors of "stupid policies". "To print a lot of money, that's the first message. To print money, that's the second message, and to print money, that's the third message, and no more," he told Reuters Television. Primakov has told major creditors like the International Monetary Fund that he will press on with market reforms. But foreign investors have voted with their feet in the opposite direction. The American Chamber of Commerce in Russia said U.S. companies were slashing jobs. "We all of us believed in the reform process," chamber head Scott Blacklin said. "And now it turns out we were wrong." The rouble, which lost some 30 percent of its value on the streets of Moscow on Wednesday, was weaker again. On the SELT electronic trading system of the Moscow Interbank Currency Exchange (MICEX), it was traded 15.80 per dollar compared with an official 12.4509 on Wednesday. It was worth 6.5 a month ago. Primakov met several regional governors on Tuesday. The former spymaster needs to impose Moscow's will on an economy increasingly fragmented into regional fiefdoms and plagued by the corruption that marred all earlier attempts at reform. Yeltsin met former Japanese Prime Minister Ryutaro Hashimoto -- with whom he has warm relations -- and spoke of improvement in ties with Tokyo, a potentially big investor in Russia. In a significant move ahead of trade union protests planned for October 7, he also signed a series of police orders to crack down on riots and any attempts to block roads and railways. Reuters, September 17, 1998