"The collapse of the euro will detonate around the world"

Alexey Kudrin - The New Times

"The collapse of the euro is detonated around the world." 2012 will become the year of high and very high socio-economic risks-this conclusion was reached by experts of the World Economic Forum in Davos. A particularly serious situation, they predict, may develop in Latin America, Asia and Europe. Are there any good news and what are the risks for our country - The New Times asked the former Minister of Finance of Russia Alexei Kudrin*
First, several questions from the Columnist The New Times, which is now in the correctional colony No. 7 in Karelia, in Segezh. From Mikhail Khodorkovsky - to Alexei Kudrin: the first: if the state management institutions work efficiently, how would you be financial policy - just as tough? Still tougher. Few people know that the creation of a reserve fund as a pillow of safety for a rainy day was the second most important task. The first is to prevent the rapid strengthening of the national currency, which extremely negatively affects business. I give my students such an example. Take some abstract product or service that costs 3 thousand rubles in Russia, and abroad-$ 100. At a rate of 30 rubles per dollar, the Western manufacturer can sell its goods in our market for the same 3 thousand rubles, and if the rate has strengthened, say, up to 24 rubles per dollar, then for 2400 rubles. Imagine nothing happened, the quality of the product or service did not grow, and only because of the change in the course the Western manufacturer gained serious competitive advantages. That is, the strengthening of the national currency reduces all the imports, and this kills Russian production. Over the past 10 years, as a result of high oil prices, we have strengthened our national currency by 92%, that is, we almost doubled the barrier before Western imports. And if in the early 2000s the volume of annual imports amounted to $ 50 billion per year, now about $ 400 billion. The system, when we sell our oil and gas resources, and buy foreign products for the helped dollars, is the most powerful factor of reducing the possibilities of the industrial sector in Russia. That is why, by the way, China is worth the death, but withstands US pressure, disagreeing to strengthen its yuan.

Well, besides this, an excessive amount of money in the economy leads to an increase in inflation and, as a result, the growth of credit rates: this is the second most important factor that does not allow our economy to develop. The creation of a stab fund just these two factors - strengthening the ruble and growing rates - neutralized.

The second question: do you think that it was necessary to collect money not in the stabilization fund, but to invest in the infrastructure? Of course not. The question is not what we will do at the expense of this money-even if something is the most necessary: ​​roads, hospitals, kindergartens. The trouble is that this money will still settle in bank accounts. And then, as mentioned above, is the strengthening of the national currency, an increase in inflation and credit rates.

What is the point of earn on the sale of oil if you do not have the opportunity to build normal roads in the country? Normal roads can be built without oil - which is proved by the experience of dozens of countries. But the country's powerful currency reserve significantly increases the convertibility of the national currency, which, in turn, creates an important advantage for business: it allows our company to freely, without restrictions, to receive investments in the West, to invest, import products that are in the world. But the most important thing is to invest here, at home, and use the ruble for any operations in the world. In general, the ruble today is slowly increasing its potentials, and the entire CIS has already begun to take rubles for calculations.

The third question from Segezhi: why did you not use the budget surplus, which was before the crisis to form a pension fund? Just we did it. If you remember, at the end of 2007 we divided the stab fund into two parts - the reserve fund and the national welfare fund. And the Budget Code states that the national welfare fund can be used exclusively for the costs of the pension system.

But in the budget of the Pension Fund today a hole of 1 trillion rubles ... yes. Now this trillion is for pension needs - by the way, 2% of GDP - we take from the budget. As a result, for three years now we have not accumulated anything, but only spend oil revenues, including financing the pension fund deficit. But problems with the payment of pensions will only increase due to the fact that we have a demographic situation more acute than in other countries. And after 3-5–7 years, we will be forced to spend not 2%, but 4% of GDP. And then you have to raise taxes.

Will taxes be increased in the near future? Firstly, they are already increased in terms of insurance premiums. Secondly, if a military re-equipment program is preserved, designed for 20 trillion rubles until 2020, then, of course, they will still be increased.

But if Medvedev becomes the prime minister, will the defense budget be saved? That's what I thought about this on September 24 ...

* * For more details, see the first part of the interview. It would become worse than the Davos forum discussed how to prevent a new aggravation of the global financial crisis. But the latest data for the IV quarter of 2011 as a whole in the world economy are not bad: in China, 5% sales of cars increased by 5%, in India, after several months of the decline in November, industrial growth was recorded by 5.9%. In the United States, unemployment rate decreased to 8.5%, and in December, the increase in jobs amounted to 200 thousand. Maybe the world economy is beginning to come to life? All these data are actually little about. In the framework of the general volatility reigning now in the markets, some numbers will be higher or lower. But in general, in the coming year there will be a tendency to deteriorate the situation throughout the world economy. According to the latest forecast of the International Monetary Fund, the EU economy awaits a decline by 0.5% - which means, most likely, we will see the Eurozone recession this year. Even the leading economy of Europe - Germany - increased by 3%last year, and the official forecast for this year - only 0.8–0.9%. The rest of the Eurozone countries are even worse. The European recession will hit the USA, and indeed everywhere in the world it will become worse. Including in Russia. If, according to the results of 2011, the growth of our GDP is 4.2–4.5%(the official figure has not yet been calculated), then the expectations for 2012 of our Ministry of Economy are 3.7%, and the IMF is lower-3.3%.

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For three years now we have not accumulated anything, but only spend oil revenues, including financing the pension fund deficit

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25% of the policy of capital outflow from Russia amounted to almost $ 85 billion over the past year. It was more only in the midst of the crisis. Why are investors running? Mostly the capital that is associated with work in the stock markets leaves. As a rule, these are portfolio investments, including loans. Today they were given - this is an influx, tomorrow they need to be returned - this is already an outflow. In crisis periods, of course, they credit less: the conjuncture is worse, below the prospect of sales of products ... Therefore, old loans are returned, and new ones are not issued. So the outflow of capital is fixed.

And you do not associate this with political risks caused by the Duma and presidential campaigns in our country? The influence of political risks on capital is minimal. Before the 2008 crisis, there was an influx of capital in Russia for $ 80 billion a year. By the way, we also had elections and also had political risks. They did not interfere with the tributary of capital. So the share of political risks accounts for no more than 25% of the total outflow. The remaining 75% are associated with commercial risks. That is, on the one hand, capital in crisis situations (and now we are observing the crisis in the eurozone) always leaves from developing markets, which belongs to Russia, to more proven, and on the other hand, the Western business mobilizes resources to confront its own risks and, accordingly, withdraws them from other countries. Therefore, I believe that these $ 85 billion outflow should not be scared of us now.

They say that this money is mainly the funds of Russian business, bred in their offshore? Some part is unconditional. But I believe that no more than a third. The rest is real means of Western investors. They want to make money in our country. The profitability of investments in Russia is higher than in most other markets. The fact is that now, during the crisis, in principle it is very difficult to find profitable assets to earn. Judge for yourself: the US Federal Reserve issues loans under 0.25% per annum for an American bank. This means that in order to earn and postpone something in the reserve, you need to place them at least 2-3% per annum. Investing in our assets provides profitability about 5-6%, so foreigners will enjoy investing here.

However, the American Forbes has recently appeared an entrepreneur’s article who conducted a business in Russia and came to an unambiguous conclusion: from Russia it is necessary to take away legs. The reason is an unpredictable corruption tax. It is clear that business everywhere has to be given bribes anyway, but in other countries their size can be calculated and brought into a business plan. And in Russia it is already completely impossible to understand who will run into you, who and how to pay. How can you do business in such conditions? We had corruption before. Nevertheless, before the 2008 crisis, the flow of foreign investment intensified, and in terms of the ratio of the direct direct of foreign investment to GDP, we almost caught up with China. In China in 2008, this indicator was approximately 4.8%, and in Russia - 4.2%. Last year, taking into account the crisis and cooling of world markets, China had 3.2%, and we had 2.8%. Of course, corruption affects the deterioration of investment climate, but in general, as you can see, we do not really lag behind investments from China. For many investors, it is interesting to work here, but you can make a lot to make money.

American drama can be expected in the United States of a remake of great depression of the late 20s of the last century? The head of the IMF Christine Lagarda said that the repetition of the great depression may well be. Given the fact that one of the most professional groups of economists in the world is collected in the IMF and they have the authority to check their economies from all governments, Lagarde should be taken seriously to the statement: it means that the situation is really bad. It is clear that mainly risks are associated with the Eurozone, the fate of the euro. But for the United States themselves, risks are no less serious: they are associated with a high budget deficit, which they need to somehow cope with. So far, the real steps to reduce the deficit on their part are not visible.

Recently, Barack Obama announced a decrease in military expenses ... This is a minuscule - $ 50 billion a year. And they need to reduce trillions.

But the Nobel laureate Paul Krugman does not think so. In one of his recent speakers in The New York Times, he states that a budget deficit is not a tax on future generations, but, on the contrary, investment in the future. I do not agree. The size of American debt in recent months has exceeded the border of 100% of GDP: this means that the country's economy has entered a fairly dangerous zone.

Why? After all, America itself prints the very dollars that it owe to other countries ... What does it mean? After all, this money is not taken from the air. The Fed, managing liquidity in the world, issues dollars in the form of loans to American banks (only they are registered in the Fed), they, in turn, are credited with other banks and enterprises, and these dollars seem to be spilled with an even layer throughout the world economy. Even Russian-Belarusian calculations for oil supplies are carried out in dollars. As loans return, natural compression of this money supply occurs - provided that the Fed does not continue refinancing. But if the American budget takes more than a trillion of dollars every year (that is, such an amount of American currency is printed additionally), then instead of compression there is an inertial increase in the money supply. And this in the coming years can reduce the trust in the dollar, its ability to be a world reserve currency and provide the necessary volume of resources of the needs of the world market. Accordingly, the dollar can noticeably fall in relation to other currencies. But this will not happen now ...

And when? When everyone is convinced that Americans cannot reduce their public debt. It is necessary for another 2-3 years to make sure this: the presidential election will be held in America, then everyone will discuss the actions of the chosen president - a new or old one, then they will decide what to reduce. Social programs? Road construction? In any case, for the Americans this will be a shock: they will face a new reality for themselves, with a decrease in their real income, with a reduction in their consumption. Already now it is a serious social and political problem in the United States: the current generation understands that it will live worse than the previous one.

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The size of American debt in recent months has exceeded the border of 100% of GDP: this means that the country's economy has entered a fairly dangerous zone

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Oil fortune telling the total slowdown in the global economy is fraught with a drop in oil prices. Can the price of a barrel fall to the level of the 90s when it cost $ 7–9 per barrel? As you know, oil quotes are poorly forecast. Unfortunately, reliable calculation formulas have not been created. Moreover, now the price is affected not only by the factors of demand, but also to financial speculations on oil contracts, which even more confuses the whole picture. Therefore, I will answer your question like this: such a sharp decrease in oil cost is possible, but unlikely.

And what price, in your opinion, is most likely? The budget for 2012 has the average oil price $ 100 per barrel. Since we already know that at the beginning of the year, a barrel costs more than $ 110, which means that by the end of the year it is expected about $ 90. In fact, such a decrease can occur earlier and not to stop by $ 90. Personally, I think the level of $ 80–90 by the end of the year is very likely.

The other day, Barack Obama ordered a permission to drill 75% of the American shelf, which can potentially bring to the country, according to various estimates, from 18 to 30 million tons of oil. The parallels with the situation of 1985-1986 are suggested, when Saudi Arabia sharply - 3-5 times - increased oil supply to world markets, which immediately brought down prices for black gold. Can a story repeat? The decision of the Americans, of course, will affect the price of oil, but slightly. There are advantages: a decrease in energy costs will prevent a serious slowdown in economies.

But if Iran blocks the Strait of the Ormuzian Strait, will the price of oil increase? Yes, this factor can affect the increase in the increase.

So, the Western war with Iran is beneficial to us? If we assume that speculative and incomprehensible oil prices are beneficial for Russia, then yes. But I do not think that this is beneficial for us. Indeed, at a hypothetical price of a barrel of $ 150-200, the world economy will slow down even more. All oil consumers - and this is the vast majority of leading economies - will stand up. And as a result, we will get a complete collapse of financial markets and the absence of any demand for our export products. Ultimately, expensive oil will return to us by boomerang - we will receive a blow to our economy, but even stronger. Therefore, I am a supporter of more moderate, but more predictable oil prices.

The end of the euro? Will Eurozone be preserved? In the current form - no. From the eurozone, with a probability of 90%, several countries will come out. Greece is probably plus someone else from the south of Europe-up to Italy, whose debt is 120% of GDP. It should be borne in mind that Italy is one of the ten leading world economies and a large number of European banks are very seriously closed to a tremendous Italian duty. And if the country does not cope with him, this will lead to a serious deterioration in the whole situation in Europe.

Will the euro survive? The problems of the euro are so serious that on the agenda is the issue of preserving a single European currency, and I will not entrust that it will remain. The probability of its collapse is less than 50%. And a possible collapse of the euro can detonate an even deeper global crisis.

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* Continuation.
The first part of the interview with Alexei Kudrin, dedicated to politics issues, is see the New Times No. 1-2 of January 23, 2012