hello again the welcome couth spotlight the unfinished arctic i and our nadia and today my guest on the show is under 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 economy is the most pressing issue as the issues are quite a few specially after nine years those countries had their credit rating cuts earlier this month so what should we expect to happen to the world economy and the neoprene david the forum in davos will be helpful so we're asking one of europe's most prominent economists former advisor to the russian government anders often. 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 the rio being part of europe russia has to come up against the global challenges but as for now it's managed to cope and recon in me is still growing. oh mr austin they're walking to 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 only on prospects for future growth and the cohesion of societies and quit while it's struck me that exactly the same words we use. 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 proved and mabel during a year to do anything to tackle the crisis except ride war it's. a pretty accurate analysis it's discipula regular pm 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 video resume breaks out personally i think 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 but discussions in doubles this year you sound pretty optimistic speaking about the solution that you thiel 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 and what what are these actions that could prevent the wave of the new wave of recession where lay i think that we are seeing a recession in europe already and probably we are seeing a decline in the d.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 issues that need to be resolved and the european politicians simply need to undertake proper. decisions about we don't get the start off 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 of 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 are now becoming as large a part of the world economy as of 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 while answering the question of transformation you mentioned the brics countries were actually earlier today when the when the with advanced economies are facing slowly . konami growth doesn't 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 and in newly emerging economies to the brics we have seen very very strongly for the last decade and the question is rather for whole long it will continue and i think that you are 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. more optimistic on europe than most people are and beyond it 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 an r.v. expect asians are three to four percent that's a grove instead and the question is if russia and other countries that are reaching this middling 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 she said that you'd rather own zone right you know to keep your money in euros rather than in the u.s. dollars that's why she said so look at all those troubles 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 some 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 europe has an immediate crisis of them which is acute it has given you is a 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. states has more long term fiscal problems and therefore us is not likely to have a crisis any time so the bad. fiscal situation that is long term

sustainable knowing european countries including france which was a rated u.s. had their star ratings downgrade how does this affect the situation on the european market situation with the euro conservative 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 there in austria that has a aaa rating and lost it and we gather. if it is banned european financial. stability facility lost. its standing the situation in europe becomes moot difficult from a financial point of view to handle all s. and p. and the. reaching rating agencies they are often blamed for and for for

organizing for the global economic and canonic meltdown for 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 loud 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 but they are acting too late and if you take the more

securities better they gave aaa or rating. the problem was that they thought. 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 really bad if even the rating agencies say that this is a difficult situation what's your opinion of the efforts of the european authorities to create their own rating bodies is there is it just means that they're angry on the rating agencies or is it a step in the right direction. the problem is rather that there are only three big rating agencies is in the world's about best too little competition among them and it's also a problem hall they are being financed. the bet may have been financed by the

parties but the they're all being raked. to have a state board to doing the. breaking will draw being introduced in addition and by is 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 of the we're talking to anders also learned 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 after we take a short break so don't go to a. wealthy british style sign. that's not on the president's prime time.

market why not come to. find out what's really happening to the global economy with max concert for a no holds barred look at the global financial headlines tune into a report. is due to.

welcome back to spotlight on our granard in just a reminder that my guest on the show today is mr austin 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 the money is really beyond a very limited. to as it is today the euro zone has an average public debt ninety percent of g.d.p. and. my colleague in washington come and rinehart and harvard professor can draw golf they have. made it in period of study which shows van

if you 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 leap well i would agree to that but when when the story to measures and taken on such a large scale and i used to tackle such such big problems they mainly penalize the 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 for 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 earned 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 bet 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 of the protestant and then also since it is the country which are which is why i think those are here. it what is very important here is very few act fast and hong kong and the baltic countries and stone you latvia lithuania and also iceland acted hard and fast and they have

the balance right why in ireland and 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 them selves and they should take sufficient measures so that the countries become financially sustainable or wise you don't get a critical 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 undercounted 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 and the master if the criteria for ye of the year. 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 the bay of course is over the counter and to euro crisis is 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 main main factories and you 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 or what do you think while russia is is a specific place will is good about russia is the macro economic policy.

has a balanced budget hardly any public debt and it has a floating exchange rate non-secure 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 oil prices will in all likelihood fall and vetted structure hard also be other weakness is subject to capital flows last year a fairly capital outflow capital flight of eighty four billion dollars so these are the two weaknesses the oil prize and capital flows but also in the while you were advising president yeltsin and and you got a guy there who ran 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 of 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 a bet it will stay at approximately this level for at least the so it's not likely to actually go for russian for countries like russia below below eighty. barrel if it falls below the two eighty or below them it is really may be critical. to day the balance is that 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 continue in the 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 one of the specifics of russia this year two thousand and twelve is the election year english 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 while the growth rate is generally expected to be somewhere by 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 spent more checks and balances will interstage regard less or be exact the 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 from 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 realizes 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 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 being improved then russia would have a wonderful future so when the russian leadership is talking about the need urgent need for modernization they're absolutely right is it that that lives in this discussion 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 the mission to be undertaken so the question is as somebody said that this conference isn't off dra the will to do about how to get it done thank you thank you very much for being with us and just to remind you that my guest on the show was anders aslund 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 part right

there john they'll be back with more first on comment on what's going on in and outside russia until then stay on target and please take. down the official anti application. i pod touch from the shops to. watch all the lights on the good. video on demand. an r.s.s. feeds now in the palm of your. question on the dot com.

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pressure rounds of violent attacks in libya as could afy loyalists retake a former stronghold with warnings that a new war is on the card. the gulf states withdraw their observers from syria as the e.u. slaps new sanctions on the troubled country. and paying for black gold with the yellow one india reportedly finds a way to buy iran's oil despite the new e.u. embargo.

is now just after six pm here in the russian capital this is r.t. with me rule re sushi in libya loyalists to the late moammar gadhafi have retaken their form a stronghold of bani walid after clashes with the new government forces fighting between supporters of the new and the old regime has been seen in cities all across the country as are north africa correspondent maria financial explains. in the last few days the situation has been very tense and dangerous and with. the number of anti government protests and clashes between the pro-government forces and the forces loyal to the ousted leader more money could be taken place in different towns all across the risks are indeed very hard that the country may fall into civil war the most ball and the most deadly incident happened in the town of bani walid. southeast of the.