it's hawk all her moscow and all the plants results in the rest of hearts in support of hamas in the senate and what she's days deadline plaguing the legislators will hutton false to avoid simple. access that sense of doubt that that little knowledge of the stone yeah but it's once again calls and rage among activists who say tagging along the lines is not meeting the needs of more tragedies similar to what we're doing away. it's red it's bracing

itself for the biggest presence rowdies seen a few years down the government demonstrations in the country are drawing hours in the arab spring up. next. russians capabilities in the world's financial arena with images addition of on the money. following well from there on the money would have business of russia if you used business i'm peter lavelle today we're talking about russia in a volatile world. discuss this issue i'm joined by chris we are

here in the studio with me is chief strategist and i n g we also have yvonne chicago he is chief economist for russia and c.i.s. at renaissance capital and we have a cough he is head of asset management at gazprom bank and andre who is near the source he is c.i.s. russia strategist and vice president citi investment research in our sis at citi bank ok chris i'm going to start out with you gentlemen let's all talk about the volatility in the world let's start with the eurozone. where is it going is there any end in sight and if there isn't and so i would say outcome. no i don't think that's what we're not expecting to see any you know short term solutions clearly this is a very extensive problem it's going to require substantial you're all right you know solution so i think you know obviously to the summer months we expect to see some perhaps some temporary stopgap measures but it's only been started that is for two years it's going to keep going like that i would think you know we are now at

the point where there has to be something much more radical we will need to see the banking system in europe for example provide it with some substantial trillion euro or backstop for example because that's the big threat to all of this is that if you do get a default and leave these countries then you start to run and we're going to default in a second even when we do you think it's going this year a crisis actual degree with. it's a problem that will get pressure that will put out for a number of years probably and it'll take a lot of time to solve itself i think the key is that you have the political countries that are noncompetitive at all and therefore it's very difficult for them if. exchange rate to recover this competitiveness and that's the core of the problem and told me if i can go to you where do you think the euro is going to go because it seems to be consensus here at least in the studio that if it's going to be fixed it's going to take a hell of a long time in a lot of money. oh i can only agree that in the short term there's not going to be you know some radical fix which will solve all the issues however i

think. you know there is enough we are to avoid. you know meltdown and. i think strongly strongly believe that. there's not going to be default. in eurozone even in the peripheral countries because otherwise it's going to be really contagious and we will not be stopped you know from spreading from greece portugal and ireland to ward spain italy and. later to germany because these guys won't we're not having anybody to buy. their exports so it should be stopped every for all of europe otherwise it's going to be really really going ok i'm going to try and go to you and we just heard it was political well i think there's more fear than anything else that's why they have to fix it before we talk about how it affects russia where do you where do you think

you're always going to go. problem is on this face in. these quite fundamental and of course is going to solve in any near term future so that's why you probably are you completions are trying to put. the final solution of the problem for as long as possible so we will see some tomahawk measures taken pretty soon bot. of course one cannot expect to find another off. one policy. or conversely if a critical policy will dissolve anytime something ok chris let's go back to the studio here and let's go to the u.s. double dip in the future before we go to us could i just add one last point on which on the euro zone i think that the political angle is very important here because it seems to me that you know while as you quite rightly say it's more the more fear of of a meltdown rather than political will i think the political aspect is important in

that we are seeing these major political differences in other words the voting public in countries like germany that are very solid and they're increasingly getting fed up and what you know you pay for exactly and i think that's the issue so i think i wouldn't automatically dismiss therefore some form of a default i think that the german seemed to be gunning for something as you know the shared pain you know rather than have the german taxpayer pick it all up for example and i think it seems to me from listening to chancellor merkel is that she's in favor of some sort of controls de force if there is such a living for elected yeah. there's a scene for you where they are pushing for extremely dangerous territory of course once you go down that road you don't know where it's going to go but it seems to me at least from the political side the southern countries don't want to be picking up the tab all the time they want to share it and i think that's at the core of this issue right now that the euro what are you supposed to be all about and what about of us us well i guess we all assume that the that the u.s. will strike some sort of a temporary deal to prevent you know before in august august before. so that's what

the market is assuming and i guess the noises coming from us suggest that is the case but again we're looking at a stopgap measure we're looking at some sort of a temporary solution i think you know this whole issue of debt and deficits and trying to balance growth with stimulus is likely to be the backdrop in the u.s. and therefore globally right up to the election seems to be. flavor of the month what do you think about these was actually because you know a temporary agreement looks like it's in the works here but that doesn't solve the fundamental problems the united states has with it this may be the case but i think that still believe that the people policy mistake in the united states is much less than the political policies of partisan stake in europe i don't think that at this stage of the game there is an appetite in united states for making such an error and actually it's very interesting because this is a very nice contrast to the lehman situation i think there was an appetite rather than to say you know it's good to have a big investment bank fail and. something happened but i don't think this is the

case right now and probably this is the good news and it's. going to you are now and where do you think the u.s. is going in its economy and we look at volatility in the world because you know we're looking at the chinese are watching very carefully they don't want to see any kind of major breakdown in the in the u.s. budgetary system nor does anyone else in the world where you think the u.s. economy is going. well we don't expect you notice any. surprises on the positive side you know some unexpected jump in the. employment or the growth but. we think it's going to be pretty nice you know economy is going to expand moderately and jobs will grow and you know the budget deficit will be reduced just a question of how much. as we all heard if it was not would be not enough you know to keep the economy going it would be what if he's in three and

a lot about now and i did you a little bit later but is right your point going under you are you was optimistic on the u.s. economy is a little years. more politically as a comment than on. our economy because. it's fundamental i mean it could all be solved in the binary where you. will discuss a default or not default but it's a matter of how well how much money will be printed to call the or. the how much tax for the. can be raised in the future so in a sense they're less fundamental than that if you was ok gentlemen let's go let's turn this to russia chris how is all that we've mentioned in this program so far of affecting russia and how will it affect russia it will right now russia's been affected because investors globally are just risk adverse you know be taking any

major bets they're watching the big picture in europe in the u.s. and that means that they're generally very quiet in countries like russia let's face it peripheral countries russia continues to be viewed as something as a derivative trade in the global economy so so that uncertainty is affecting russia it's it's we've seen volatility in the stock market the market of course reflecting the news flow but in general there's not a great deal of investment activity in. for now it has to be said you know thank god for libya. but this is. really keeping the old process going twenty. you know relatively look fiscally and in terms of its budgets it looks very good but it's still you know the backdrop obviously it's still viewed as a as a risk economy in the global context because we are so so exposed to the global economy and that long term you know is obviously the big picture is the big story for russia if if the u.s. or europe doesn't get it right if they make a major mistake and we dare for go into some you know a double dipper or

a big slowdown and global economy and of course russia is going to be whacked just as much as it will talk about oil in the second part of the program so what do you think about this i mean how is russia faring through all of this volatility because we can we're on we'll talk about what happened in two thousand and eight but you know is russia a better bet in some ways i mean is it a flight to quality. in some ways i think russia is more vulnerable now than before and i would like to go back to the fiscal issue that mentioned as everybody knows that oil price that is needed to balance the budget right now it's a hundred and twenty five dollars it was much less before before the crisis russia was was in a much better fiscal positions they had more money to to to put a aggressive counter cyclical fiscal policy if now if we experience a major shock to all prices i think the where we thought of the right of the russian authorities is much less so this could be an avenue rather which they could be affected of course there are a number of ways in which actually it actually is less probably going to probably

going to be less vulnerable for example they have a much more flexible exchange rate policy than before flexible exchange little more flexible exchange rates that are going to be less flexible exchange rate before and they have a much less share much smaller share of short term external debts than before the crisis and i think this is also going to be positive for russia should we experience some major storm struck certainly what do you think about is russia more vulnerable now than it was before the start of the crisis in two thousand and eight . oh of course much less vulnerable because so many lessons have been learned in two thousand and eight and now the policymakers are equipped with all these refinancing mechanisms you know the banks you know can be easily refinanced and much less dependent on the borings from the international lenders and also the reason why am i says that there is much less hot money from international investors right now in russia and. virtually all the

average in the stock market so. i would i would i would say that we're way too much less vulnerable and we're in a lot you know from the two thousand came i want to go on holiday for we're going to go under what do you think about russia more or less vulnerable than it was to in two thousand and eight for we go to the uk i think it is less wonderful than it was before the crisis because the duration of the work was increased and i think the corporates for learned the lessons of the cross and made our overall market more vulnerable because of this issue of a higher budget because of all price and ok gentlemen i'm going to jump in here we'll go to a short break and after that break we'll continue our discussion on russia and global volatility state with r.t. .

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market dynamics. find out what's really happening to the global economy is a report on our. welcome back on the money. today we're talking about russia and volatility but first let's have an overview of russia in the global economy. the two thousand and eight now down so global investors desired russia and then the government into the community and economic support there is russia had prior to that has been says largely rebuilt there is a reserve that has been built up. currently we have more than one hundred twenty billion dollars. in the wealth funds the those resources

can be used to further attenuate any crisis that comes russia's way for them or there are more than five hundred billion dollars tax reserves that russia has to try to deal with any volatility on the exchange rate front still how well for. it needs to be taken into account that these levels of reserves are lower than the ones that russia had before the first wave of the crisis in two thousand and eight two thousand. players. all lined by the markets already pricing one in with a major impact the russian nuclear. the truth financial markets in china's first five g.d.p. growth was still stronger and then expected a three digit rate hikes and it me through the measures to reduce inflation that old it interferes hard landing into in commodity prices the u.s.

debt ceiling impasse has a potential to bring the global economy to help by the moon likely commodity variable is the answer q e two it has been a key factor inflating commodity prices including russian exports it into budget revenues and inflationary pressure still economists note that the scheme of government outlays has increased significantly still have tongues on one point. eight zero when the crisis came russia's was breaking federal budget brick of a level below prices was wrong about where the crisis because russia continued social spending also because. of the clown with the comics. now west they were the party breaking the under twenty got about which is much much harder and the pay delicately balanced view of the climate used to rushing in to see all the doohickey it has low levels of public debt and large reserves with the

infrastructure but in real life sound economic stimulus but the margin in the global economy worsens isn't less than it was an economic decision makers need to declare that you do the shopping on the money markets. ok gentlemen we talk about russian policy in this in the way in a volatile environment but let's talk about corporate russia chris how how much they learned through this crisis and in the trade we have more volatility we've talked about a double dip the eurozone came corporate russia take that kind of blow well as a lot of people are virtually said before the break here russia is in a better death situation. right now than was the case in late two thousand and eight so from because things are because we've learned lessons i suppose we learned lessons and also you know the country and the global economy generally has been you

know that are low or low growth or in crisis since since that period so there hasn't been now the opportunity to grow as fast as was the case before that but i think in general you can talking to executives in russia's big companies you know they're all aware of you know how vulnerable they were in two thousand and eight and they're all determined to avoid making those mistakes again so i think lessons have been learned but we find out when we get into the next room when we think about actually i would agree i would agree with that as you mentioned before the level of short term debt has been decreased and i think it would be very helpful if we experience and i had difficulties of course the central bank before the crisis helped me of this corporates to pay truck to ok i want to show you all of the government was very important to that point of time i get a lot of short of that was repaid so obviously from the perspective the confidence in me to get into better shape credit. let's say if we get some major volatility and something of the magnitude of two thousand eight hundred thousand is the russian state in

a position to bail out corporates and their debt issues because that's what they did this the last time are in a position to do it again if that's necessary. well. the question is only in the balance. of the. foreign exchange and for a change in i mean a good loans or within a day the loans i think the corporate the corporate switched more to the rule to the ruble borings and the moon rates are quite accommodated right now and they keep going down so now it is the major russian corporation can borel you know for five years you know the rates of six point five percent in rubles which is which is perfect it's actually lower than inflation so i think that's that's a good economics and i'm not sure if you know they need to be bailed out. by the nikkei in the case of the external shock of course you know they're much better

prepared to go for their refinancing because the banks can take not only did with the corporate bonds to the central bank to refinance or to banks and also take the corporate debt loads and the in the in in the form they were underwritten so it's very very flexible now and the lots of mechanisms you know you can still provide fine lending cd corporates and the key question is will not they be no no business can be construed by was out financing there was a. normal rate of boring before anything for any business if you're in business and expect to pay back all your loans at some point then just better not started so basically doubt that the question was learned so that the state of the banking system the structural bank has to be in a position to maintain its normal level of borax which and i agree with all the previous speakers their level is normal and that when you think about that is really is corporate russia in

a strong position now if there's an external shock or we have more of our own volatility. oh yeah i would agree that there will be no choice need there will be a lot of corporates if something happens externally. and still one month for hundreds of succeeding people the amount of. for russian federation and what the problem is that in case of major external shock we don't know we'll have different problems with our problems with the budget but. if it happens the government needs to focus more on our fiscal side of our corporate startup ok chris let's go back to an issue you brought up earlier and it was all thank god for libya but i'm quoting you ok. but that's you know russia still has a commodity driven economy to a large extent they're trying to change it and trying to change it for a while but you know if we get some kind of external shock meanwhile prices go down

another commodity prices go down how is corporate russia and the russian state what's their strategy that is absolutely the key question in the whole you know some investment story for russia for the next few years as you say currently very commodity and of means very vulnerable there for what happens in the rest of the world. the government has been talking in identifying you know a whole series of reforms that need to be made cross the whole is kind of is it enough come on you've been here a long time well what we actually want to see is progress on the reforms i mean you know providing lists of what needs to be done is fine we can all do that but what we're all waiting for and i think what investors are waiting for is some progress some action on those reforms to actually see that it has been implemented and i think that's you know on the one hand you could say if the price of oil were to go up to one fifty one sixty then you know we go back to the sort of complacency and slow progress we had before you know i think there is certainly an argument to be

made that if the price of oil were to go down to something that's a hundred and that's something dramatic would say down to one hundred. but that provides you know some financial stability but a lot more momentum and a lot more impetus to the reform program because you have to get on with the key issue for russia looking over the next few years is that even one twenty one twenty five dollar oil is not going to prevent a significant slowdown in russia's economic growth the only way that can be prevent this is with a substantial increase in investment and a lot of that would have to come from foreign investors if we have a double dip global recession it will be much more difficult to attract that it means the government will have to try harder to make russia even more attractive so i think a substantially different game for the government after the next election and what do you think about that i mean you know when we look at. the price of oil and other commodities here do you think the government is going in the right making the right move moves and making the right sounds because i've been here a long time and we've heard about diversifying respect ation away from petroleum

but you know it's a very slow process that is that is true but i think there is one fundamental difference from our economic perspective right now russia is already running a fiscal deficit i think you for your sort of time russia will start running a current account deficit before in four years time russia will felt we will face a classic tween deficit problem just means that this twenty deficit on external side on the fiscal side have to be financed somehow and the only way for us to be able to finance this split track three investment i think the government maybe for the first time in a very long period of plan understands that so they understand that they have to make some improvements in the overall business environment in order to be able to finance these deficits and i think that i didn't russia has never lifted such deficit and it will be a totally different paradigm for them and this is the only way for them to finance the deficit we have to increase the overall business environment we have to. decrease corruption all these reforms i think that there will be more serious about because of the prospects of facing preened deficits in the future and italy what do

you think about that. this is a very good point given brings up about double deficits or is the stay prepared for this. well it's hard to get you know prepared for this are one side you need massive investments in infrastructure and you need basically to not only help you know economy as that happened in two thousand eighty thousand and one when the state was helping out the corporate sector or the private sector it's you sustained a crisis but you really need to get the investment started you know the internally about and start it. you know on a massive scale much much bigger than we ever seen before. so that's that's a key thing and that's the. issues nightmare economics is not a macro it's very hard for me if i can try to govern can try but it just it takes time but what we see and what we just very glad to see it out that you know it's.

you know the economic activity speaking up you know you know we get a caller gentlemen we have all run out of time here something i'm not point there i want to thank all my guests here in the studio in their points and thanks for viewers for watching them on the money see you next time the state party. for the. we've got. the biggest issues getting voice face to face with the newsmakers. mission. critical three. for challengers three. three three. three. three. three born to be old for your media

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