The wave of the global financial crisis that swept the world in the fall unexpectedly turned out to be a factor in the rapprochement between Russia and the European Union; back in August, after the war in the Caucasus, they were planning to radically reconsider their relations. At the November Russia-EU summit, Moscow and Brussels agreed to fight the crisis through common efforts and begin discussing the formation of a new architecture of global finance. Along with the four spaces between Russia and the EU, a fifth one has emerged - the anti-crisis one.

General blow

Russia and Europe faced the global financial crisis almost simultaneously. Back in late August and early September, the front pages of both Russian and European newspapers were full of reports about the recent war in the Caucasus. On September 1, EU leaders even gathered for an emergency summit dedicated to the consequences of the events in Georgia and relations with Russia. As a result, the heads of EU member states adopted a statement that it was impossible to “conduct business as usual” with Moscow under the current conditions. Negotiations on a new agreement on partnership and cooperation were also frozen until the Russian Federation fulfills the Medvedev-Sarkozy peace plan. It seemed that the Russian-European dialogue could be forgotten, at least for several months.

Everything began to change just two weeks after this summit. On September 14, the bankruptcy of one of the largest US investment banks, Lehman Brothers, was announced. For the whole world, this news became a signal that the decline in stock indices observed since the summer turned out to be not just a correction, but a prelude to the collapse of quotations on a global scale and the beginning of a global crisis. After that, the press and politicians seemed to have forgotten about the war in Georgia - everyone was talking only about the crisis.

The crisis hit Russia much harder. Since September, the Russian stock market has demonstrated perhaps the worst dynamics in the world. In the first three days after the bankruptcy of Lehman Brothers, the RTS index sank by more than 16%, then continuing to decline rapidly and break through one psychologically important level after another. Instability on the sites was added not only by fears of the growing crisis, but also by a number of internal factors: the shareholder conflict in TNK-BP, the Mechel affair and the military campaign in Georgia, which increased the flight of capital to the West. Finally, the collapse in oil prices from $147 per barrel at its peak to below $50 at the end of November played an important role in such a rapid decline. Since the beginning of the year, as of November 22, the RTS index has lost almost 75% of its value, falling to the level of 550 points. Compared to the peak of this year, which occurred on May 19 (the maximum index value on that day was recorded at 2498.10 points), the drop was almost 80%.

The fall in European indices was not as dramatic as in Russia, but also quite significant. Of the 45% that the German DAX lost over the year, the last three months accounted for about 33.5%. The leading British index FTSE 100 fell by almost 40% in 2008, with the index having lost 30% since September. The French CAC 40 index behaved similarly.

Already in September it became obvious that the crisis in Russia and the EU would affect both banks and the real sector of the economy. Many loans were given by banks against the security of company shares. When the market fell, the collateral began to depreciate in value, and when the shares fell below a certain level, a margin call occurred - the bank was forced to sell the shares to get its money back. Of course, the bank's dumping of shares only spurred the market's downward movement. Companies began to cut costs by laying off staff, and in the face of falling demand, many were forced to suspend production. It became obvious that it was impossible to do without government intervention. And it was precisely this that became the first point of contact for Russia and the EU during the crisis - many of the actions of Moscow and Brussels turned out to be quite similar.

Similar solutions

Of course, European regulators did not close trading for several days, as the Russian Federal Service for Financial Markets (FSFM) did repeatedly in the fall. In addition, in November, the Russian Central Bank began raising rates in an attempt to prevent capital flight and combat double-digit inflation, while European central banks lowered rates in an effort to provide banks with easy access to borrowed funds. Nevertheless, some features of the Russian and European anti-crisis plans turned out to be quite similar.

Like most European governments, the Russian government decided not to buy out troubled assets from banks, but to inject additional liquidity into the economy. The corresponding stabilization plans were announced by the leading EU countries in October - the decision was made at an emergency EU summit at the end of September, organized on the initiative of French President Nicolas Sarkozy. The amounts amounted to tens of billions of euros. The head of the European Central Bank, Jean-Claude Trichet, announced the provision of loans to banks at a rate of 3.75%.

The Russian authorities also began injecting liquidity into the economy, but they did it piecemeal. In mid-September, the allocation of 1.5 trillion rubles was announced. (about $44 billion) to Sberbank, VTB and Gazprombank on the condition that they support other banks. Then President Dmitry Medvedev announced government investments to support the stock market in the amount of 500 billion rubles. (about $20 billion). At the end of September, Prime Minister Putin announced that any bank or company will be able to contact Vnesheconombank and receive a loan to pay off debts to foreigners. The Bank of Russia allocated another $50 billion for this. At the beginning of October, the President of the Russian Federation announced a new package of measures worth 950 billion rubles. (about $36 billion). The latest package, worth about $20 billion, was announced by Vladimir Putin at the United Russia congress.

Another anti-crisis measure that both Brussels and Moscow took was an increase in state guarantees for citizens’ deposits. In October, all EU countries agreed to raise the size of deposits, the safety of which is guaranteed by the government, to €50 thousand. Individual EU countries went even further: the Netherlands, Spain, Belgium and Greece agreed to guarantee the safety of private deposits up to €100 thousand, and the UK - up to £ 50 thousand. In Russia, the state also agreed to increase the amount of the insured amount from 200 thousand to 700 thousand rubles.

Finally, both in Russia and in the EU countries, states began to nationalize problem banks. Moreover, in Europe the pace of nationalization turned out to be even higher than in Russia. The first high-profile case was the nationalization by the Netherlands in September of all assets of the Fortis banking corporation located on Dutch territory. The remaining assets of the bank were acquired by the French BNP Paribas. Following this, many EU banks came under the control of governments. In Russia, state corporations were involved in this process: the first nationalized bank in October was Svyaz-Bank, which went to VEB for 5 thousand rubles. Then Russian Railways, with the participation of ALROSA, acquired the investment bank KIT Finance for only 100 rubles.

The similarity of actions by the financial authorities of the Russian Federation and the EU, as well as the growing crisis, led to Moscow once again intensifying its dialogue with European leaders. As Dmitry Medvedev admitted in an interview with the French newspaper Figaro, published on November 11, in October and November he actively negotiated “on the crisis in the global financial system” with Nicola Sarkozy, German Chancellor Angela Merkel, Prime Ministers of Great Britain and Italy Gordon Brown and Silvio Berlusconi. Apparently, already in October the EU formed the opinion that Russia should be involved in the development of a global anti-crisis strategy. Thus, in mid-October, Nicola Sarkozy and the head of the European Commission, Jose Manuel Barroso, visited the United States and convinced President George Bush to organize an anti-crisis summit in Washington in the G20 format, which included Russia.

New Bretton Woods

It is not surprising that it was issues of interaction during the crisis that dominated the first Russia-EU summit after the war in the Caucasus, which took place in Nice on November 14. Dmitry Medvedev in an interview with Figaro said that the approaches of Moscow and Brussels to the crisis are almost identical. “We look at many things in almost the same way: both the origin of this crisis and the answers that will have to be given to it,” he said and said that he is ready to work together with EU partners on “the basis for a new Bretton Woods package ".

It is very characteristic that Dmitry Medvedev recalled in this context precisely the Bretton Woods agreements of 1944. President Nicola Sarkozy was perhaps the first to use this metaphor in his speech on September 26: “We must reinvent the financial system, as happened at Bretton Woods.” For European politicians, the idea of a new Bretton Woods became attractive primarily because it was the first system in the history of world finance that was completely artificially constructed, like many other elements of the structure of the post-war world, such as the UN.

At one time, the basis of the Bretton Woods regime was the obligation of countries to maintain a fixed exchange rate of their national currencies in relation to the US dollar (as the most powerful currency of the post-war economy), which, in turn, was pegged to gold. This gold dollar standard was essentially abandoned in 1971 when the United States abandoned the free exchange of dollars for gold due to its dwindling gold reserves. After this, a system of floating exchange rates was established in the world with the dollar as the main reserve currency - it was dollars that the central banks of the whole world sought to accumulate, and it was in dollars that most payments in international trade were carried out. Thanks to this, financial institutions created in Bretton Woods like the World Bank (WB) and the IMF became even more dependent on the US Federal Reserve System, which began to dominate world finance thanks to the issue of the only universal means of payment - the US dollar.

According to many European and Russian economists, it was this excessive influence that became one of the causes of the crisis. For example, the free market ideas professed by the United States led to a reduction in requirements for borrowers so much that money for the purchase of housing began to be issued to people with a bad credit history who spent more than they earned. The collapse of the mortgage lending market for this category of clients (subprime) was the starting point of the current crisis. Much of the reason for the inflation of the bubble was the lack of strict regulation, which the Federal Reserve was unable to provide.

It is the need for strict regulation that has become the main point at which the EU and Russian ideas about the future architecture of global finance converge. These principles were voiced at the G20 summit, although the specific formulations are still far from clear. Thus, Moscow proposes to reform the World Bank and the IMF and create a global financial institution that would have the functions of a regulator (some kind of analogue of the world Central Bank). In addition, the Russian authorities are hatching a project to transform Moscow into a global financial center and the ruble into a reserve currency. In Brussels, these two ideas are met with skepticism.

However, both Russian and European officials agree on the need to adjust the work of rating agencies, introduce stricter disclosure standards and tighten requirements for banks in relation to structured loans - all of which are already reflected in the G20 final statement. The next G20 summit will be held in April, and before that Russia and the EU have committed to developing a new system for assessing risks in the financial sector, as well as more specific proposals for the architecture of global finance.

It is likely that work on these proposals will become a new point of rapprochement for Russia and the EU. Moreover, Moscow and Brussels have something to discuss at the bilateral level, primarily the plans of the Russian and EU authorities to erect customs barriers to save national industries from the crisis. Another important topic will be mutual investments: growing capital outflow from Russia amid falling oil prices could make Moscow dependent on European loans and investments. No less than the EU's energy dependence on Russia.

Alexander Gabuev

"Guide (European Union)". Appendix No. 220 dated December 3, 2008, page 27

Authors:

Alexander Gabuev

Themes:

Single anti-crisis space