hello again the welcome to spotlight. on our team i am our nadia and today my guest on the show is. the world economic forum is kicking off and dr during the next few days leading businessmen economists and politicians will be discussing the world's economies most pressing issue as the issues are quite a few specially after nine years then countries had their credit rating cuts earlier this month so what should we expect to happen to the world economy and the neoprene maybe the forum in davos will be helpful so we're asking one of europe's most prominent economists former advisor to the russian government founders.

on january thirteenth standard and poor's downgraded nine european countries including the stronger ones like france and austria both received a negative outlook considering the european leaders inability to cope with the debt crisis the weaker spain and italy were downgraded to an economist say they are one step closer to the greeks and now rio being part of europe russia has to come up against the global challenges but as for now it's managed to cope and economy is still growing. oh mr alston to walk into the show thank you very much for coming my pleasure well on the eve of this year's davus i want to comment form the organizers warned that i quote the world is facing significant and urgent challenges that we have. of only

on prospects for future growth and the cohesion of societies and quit while it's struck me that exactly the same words we used last year during the forum well it is just a repetition of the same very good phrase but does that mean that the world politician the world policymakers approved and mabel during the year to do anything to tackle the crisis except ride war it's. a pretty accurate analysis it's discipula european politicians have not done the work they should or should have done and we are now coming to an end game of a euro crisis. there is a solution or bridge euro zone breaks out personally i think that there will be a solution to the euro crisis and the human next quarter also we will see both of your economies bottoming out and that the solution is fine so what would have a solution be. more money is needed to provide confidence and

personally i believe the fiscal adjustments that are undertaking are pretty much of a right once the banking situation is probably becoming somewhat more stable now that we have seen substantial the leveraging and then we have a greek default that has to be completed so these are the big issues that i think will dominate the discussions in doubles this year you sound pretty optimistic speaking about the solution that you theel or you trust will be found during the next couple of months the the forums global issues group as he calls it calls on the world leaders to deliver concrete actions to find the solution what what are these actions that could prevent the wave of the new wave of recession where you think that we are seeing a recession in your. already and probably we are seeing

a decline in their g.d.p. or one percent or so in the european union this year but that's not a catastrophe because if we get a real financial meltdown and it. really needs to be done now it is if the i.m.f. can mobilize the more money it's trying now to get five to six hundred billion dollars or more funding and i think that is a critical issue and indeed that of a greek default is properly handled so that it's a sorted out to be subject to big is used to that need to be resolved and the european politicians simply need to undertake proper. decisions about we don't get the start of way and are losing credibility ever more all the time the unifying theme the unifying motto of this year's dallas forum is the great transformation of

this this is the sort of the the subject that all the gathering around well what kind of a transformation is the world economy facing in your opinion well of course there are several transformations here one is about the bric countries brazil russia india and china or rising. big emerging markets is a are now becoming as large a part of the world economy as. the developed economies and it's also a question of the particularly in europe that we are seeing substantial reform of the public sector. that the labor markets are being deregulated public administration is becoming more efficient and finally education and health care or being reformed and we're seeing the reforms very much moving from the north and east of the european union towards the sound that is the big problem. well

answering the question of transformation you mentioned the brics countries were actually today when the when the with advanced economies are facing sluggish economic growth does it mean that we are facing or we are we are ready to to witness a transformation a shift of economic power from the east to the west or rather maybe from the the west to the. new newly emerging economies to the brics we have seen very very strongly for the last decade and the question is rather for how long it will continue and i think that we were seen to use coming up the one is that europe finally is reforming itself and increasing productivity and dealing with problems better should have been handled much or early is a more optimistic on europe than most people are and beyond that is that the.

number of countries emerging economies or approaching the middle income. trap as it's called and if we discussed russia concretely russia has had wonderful growth for seven percent a year. for ten years until two thousand and eight and then a much lower growth rates are not be expected asians are three to four percent that the growth instead and the question is if russia and other countries that are reaching this middle income level if they manage to reform further and reach a growth for eight or five to six percent i should be possible here or if they will stay at a three to four percent growth rate you know i've talked to my priest in the bank regis to couple weeks ago before the new year and a she said that you. brother you don't keep your money in euros rather than in u.s.

dollars that's why she said so look at all those trauma she said it's a good sign when europe was saying hey we're winning we're all together i knew you knew when we were really to be the united states well it was so so but now when europe starts talking about severe economic problems admitting those problems and trying to solve these problems which are actually problems of growth this is a better sign than saying everything's fine to do believe so it's extremely difficult to predict the exchange rates in the short term but if we discuss it in broader terms you can say about gura pass an immediate crisis of them which is acute it has given you is the step in the right direction as. i thought was same in russia in the summer of ninety eight but russia had problems that had to be resolved and instead we saw a default which i don't think was necessary but. the united states has

more long term fiscal problems and will be us it's not likely to have a crisis any time so bad. fiscal situation that is long term sustainable nine european countries including france which was a a rated u.s. had their ratings downgrade how does this affect the situation on the european market situation with the euro there's a bit it has to do with face one is that it's a wake up call to beas countries where. they should not be. relaxed particular for france. in austria that has a aaa rating and lost it and we gather. if it is banned the european financial. stability facility last.

it's a standing bet the situation in europe becomes moot difficult from a financial point of view to handle all s. and p. another rating rating agencies they are often blamed for for for organizing for the the global i can an economic meltdown for and for actually being the drivers of problems in world economy there's this reputation that they're losing doesn't still mean they still have a say in the world economic issues will they will they be listened to in dallas by the world leaders they certainly have a big role because they are mainly institutions insurance companies and pension funds which are only allowed to have. assets of a certain. rate and therefore if born loss' is a aaa rating it means that it looses

a certain part of of the market in pyrrhic really the rating agencies or tend to be behind that they are acting too late and if you take the more securities better they gave aaa or rating. the problem was about they thought. these mortgage securities mortgage basic you're it is we're better than they were so when the rating agencies are downgrading we should rather see better with means where it's a really bad if even the rating agencies say that this is a difficult situation what's your opinion about the efforts of the european authorities to create their own rating bodies. doesn't just mean that they're angry on the rating agencies or is it a step in the right direction. the problem is wrong there are only three. big

rating agencies is in the words about best to let that competition among them and it's also a problem hall they are being financed the best being financed by the parties but the being raked the. to have a state board to doing the. raking would draw being introduced in addition and by as when we want to get rid of the biases ok thank you and that we will say goodbye just for a couple of minutes just to remind you that we talking to anders aslund one of the europe's most prominent economist and once an advisor to the russian government spotlight will be back in a matter of minutes off to take a short break so don't go to a. wealthy british style sign. on the.

market why not. come to. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines tune in to kaiser report. more news today violence is once again flared up. these are the images the world has been seeing from the streets of canada. giant corporations are old today.

a walkabout a spotlight an arguer knob and just a reminder that my guest on the show today is mr astley and one of europe's most prominent economists and former advisor to the russian government mr austin and most of the countries today are starting to implement severe austerity measures to tackle their debt problems would you say that this is the best the politicians can do or you would expect something something more imaginative. where you can't imagine. really beyond a very limited means to be as it is today the euro zone has an average public ninety percent of g.d.p. and. my colleague in washington come and rinehart and the harvard

professor can draw gulf they have. made it in period to study which it can get over ninety percent of g.d.p. in public dep then big growth rate tends to fall by one percent but if you can you have to limit it when you come to that little well i would agree to that but when when the a story to measures and taken on such a large scale and i used to tackle such such big problems they mainly penalize they did the ordinary people the people that we see in the streets next day why are people have to be penalized while the banks are feeling pretty relaxed during the. periods when the governments are trying to tackle the crisis shouldn't burns be paralyzed first of all fight for

inadequately fulfilling their role yes they should be. i've been working quite a bit with latvia which has operated like that they can. the salaries most of for the people who are under more and the foreign banks take the losses so that's what you ideally should do but what you don't want is about the whole banking system falls apart that's when you have to bail them out but the we have one big example and bet is ireland where the government early on guaranteed all bank and that was wrong so so so so the governments today have to balance i mean i mean they have to take into account the security of their own banking system and keeping it stable and on the other hand they try to see the situation the streets what's happening with the people or the protestant and the whole social services in the country which are which is why i think those here. it what is very

important here is when you act fast and hong kong and the baltic countries and stone in latvia lithuania and also iceland acted hard and forced invade the balance right. in greece are examples of countries that did the balance wrong and acted. too slowly so you have to think of what you are doing the politicians should take a substantial cost themselves and they should take sufficient measures so that the countries become financially sustainable otherwise you don't get the credit bill it doesn't should should be europe's transition to a common economic policy which they talk a lot these days should it lead to a sort of an economic federalism on the continent and that's a possibility but the central thing is that each count three is financially

responsible and it's a rather funny when the germans who have ignored the stability and growth pact i'm the master if the criteria for ye of the g. and when they are complaining of it don't do them when it was germany france and italy that broke down the stability and growth pact to in two thousand and three and two thousand and five so they are the courses of the county and to euro crisis and then they should take responsibility the upon themselves and not try to blame other countries well let's talk about russia russia is only partly part of europe burns kept losing your of the mame main factories knew the government is in europe and the the elite feels itself more your appeal has has more european mentality that any than any other so what does it all mean for russia they the this situation in europe will it will it

hit russia pretty pretty hard and what do you think while russia is is a specific place will is good about russia is the macroeconomic policy but russia has a balance that it hardly any public debt and it has a floating exchange rate non-secure do not get into a devaluation crisis again and right now inflation is down to five percent and these are the positive a point the dangers are but russia is heavily dependent on the oil price and if there is a serious european crisis the only prize winner or likely who would fall and that it's russia harder also be other weakness is subject to capital flows last year on capital outflow capital flight of eighty four billion dollars so these are the two weaknesses we all prize and capital flows but also in the while you

were advising president yeltsin and and then you got a guy there who run the economy in this country this is uganda was their opponent the communist leader of russia he is still the the man. in opposition leader today and just yesterday he said on national television one of these pre-election debates that the all prices are giving down and the russian economy will collapse pretty soon if he doesn't become president of course well do you believe that. he has a reason to say so over these predictions all this is just rhetoric. some stage we all should be reduced as it is now we all prize for the last year has been amazingly stayed. the most forecasts it's bet it will stay at approximately this level for at least the so it's not likely to really go for russian for countries like russia below below eighty. barrel if it falls below the two eighty

or below them it's. really maybe critical. today the balance is one hundred seventeen dollars per barrel of course you can have a budget deficit well russia's outlook has also been downgraded from positive to stable does that mean the capital outflow which the russian leadership has been trying to to to to to tackle for years will be continued in the near future it's very difficult to to to predict the capital flows to because there are so many factors the influence it's more a big risk factor then something that is predictable. politics has also had a very strong influence on russian economy this is one of the specifics of russia this year two thousand and twelve is the election year and bush do you think what

or what do you think will be the biggest economic problem in russia during this election year. i don't think that there will be big economic problems if. the biggest concern is about corporate governance is poor in russia party because the courts are not sufficiently dependent and if the courts get more exposed then corporate governance should improve and the very low valuations of russian stocks should should arise i think that there are substantial possibilities for improvement why the growth rate is generally expected to be somewhere about three poor four percent. very positive in comparison with europe but of course harmful but what russia has been used to before the global financial crisis this is a pretty optimistic assessment from an informed person like you are. well i think

that what we're seeing now is that more checks and balances will intervene stage with regard less or be exact outcome of a political crisis which i shall be careful not to predict well we're living in the world of a shifting economic power from the atlantic to the pacific and this is obvious this may be slower or faster but this is happening do you see a place for russia in this process and what is the place for russia of course russia has one place today is one of the big producers or. in the world and the place that russia should to get is. one of the big. generators and utilizes of human capital in the world so the question is if russia can move from being a raw material producer to becoming

a sophisticated the. producer and all the resources are here. what is really missing is as we hear on the gaidar forum that i'm here for it's all of a time problem all the base this climate and investment climate and corporate governance can be things be improved then russia would have a wonderful future so when the russians leadership is talking about the need urgent need for modernization they're absolutely right is it. that that lives in business council now for since the two thousand and seven two thousand and eight and so far we have seen very few masha's so everybody's waiting for permission to be undertaken so the question is as somebody said at this conference is no drama that was to do about how to get it done thank you thank you very much for being with us and just a reminder that my guest on the show was anders paulson one of europe's most

prominent economists and once an advisor to the russian government and that's it for now from all of us here if you want to have your sense pod right there john they'll be back with more force don't comment on what's going on in and outside russia until then stay on target and please take and. download the official auntie application to your i pod touch from the top story. on the go. video on demand. minefield costs and r.s.s. feeds now in the palm of your. question on the

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damascus rejects the arab league calls for president assad to step down and form a new government with the opposition as a ten month long unrest in the country rages on. terror around stands defiant as the even close its tougher sanctions yet banning oil imports from iran in response to its disputed nuclear program. derided for being one sided extradition the war between the u.s. and the u.k. designed to help bring terror suspects to justice cases calls for review that british anger is one way street to american jails.

costing live from the heart of the russian capital this is r.t. syria has rejected an arab league call for president are set to step down the baskets criticize the appeal as an attack on its national sovereignty or something after a month of its observer mission to the country that said all sides of the syrian conflict must lay down arms the pan arab. power to a deputy former unity government with the opposition over effort has been extended but saudi arabia has dropped out despite the leaks saying that the situation in syria has improved qatar had earlier calls for military intervention but is now ruling that the e.u. imposed a new round of sanctions on the syrian regime on monday it's already under.