OREANDA-NEWS. June 29, 2009. Transcript of the meeting:  Vladimir Putin: Good afternoon.
As we have agreed we have regular meetings, perhaps not as frequently as we would like to, but they are regular meetings still. Today, I have asked you to assemble in order to discuss the issues connected with the end of the Parliament spring session, to discuss what has been accomplished over the past six months and the priorities for the next six months of 2009.

I would like to begin with what we have been talking about a great deal recently. It is natural that we are discussing it, so I would like to begin by talking about the crisis which affects the whole world economy and, unfortunately, the Russian economy too.

The problems are not new. They emerged practically as soon as market relations began to develop. Scholars have constantly turned to these problems, scholars and economists belonging to different schools and persuasions. Marx and Engels who studied these phenomena wrote about crisis cycles. First they wrote about 5-7 year cycles and later about 10-11-year cycles. In effect, they had started investigating the problems connected with what we call globalization when we see industrially developed nations expanding into new markets in America and Asia.

Unfortunately, no one has come up with an antidote. Nevertheless, I consider all these studies to be interesting and important and I would like to present to Mr.Zyuganov the first edition of the Communist Manifesto published in Soviet Russia, he will refresh it all in his memory and share his thoughts with us - in connection with your 65th birthday. Many happy returns.

As I said, the spring session of the State Duma is coming to a close. By tradition, we are meeting to discuss its results, to talk about the law-making plans and, of course, to exchange opinions on the topical problems of the country's development.

I am aware that the State Duma and the parliamentary parties have worked intensively over the past months. Some important decisions and significant laws have been passed connected with support of the banking system. Small and medium-sized enterprises, the network of federal universities, the development of education in general as well as legal acts to enhance the social guarantees for Second World War veterans, families with children and other categories of citizens.

Not all the parties have voted in support of these laws. Nevertheless I appreciate all the State Duma deputies for their active participation in reviewing and discussing them. In any case, discussion and constructive criticism are useful and they have helped to improve the quality of the laws being passed.

I would like in particular to recognize the cooperation in discussing the Government's proposals to combat the crisis. The remarks and proposals from practically all the parties have been considered and everything useful has been taken into account. Many of them have formed part of the final version of the decisions taken.

Several plenary sessions remain until the end of the session. The Government hopes that several draft laws will be finalized. I would like to draw your attention to the following.

The package of laws to improve anti-monopoly legislation, the laws to promote competition, counteract raiders, and improve energy efficiency.

As for plans for the autumn session, I would single out the law on trade which we will shortly submit to the State Duma. You will have heard and seen our discussions which involved experts, businesspeople and had a very hands-on character.

It is a particularly important theme. It has both an economic and a social dimension. We are talking about creating a level playing field for all forms of trade, about establishing civilized standards of interaction all along the chain from farm production to processing and sale to the consumer. In the long run it will be good for business and, most importantly, for ordinary customers. We are talking there about the interests of all the country's citizens.

We are aware of certain abuses. We respect all forms and types of business, but these abuses must be eliminated. The fact that the average markup at some enterprises on certain goods is 55-78-100% speaks for itself. This is too much. Clearly, every link in the chain has its pluses and minuses and we should treat all kinds of business equally. But the state must exercise its regulatory role.

Among the priorities are new technical regulations and additional initiatives aimed at supporting small and medium-sized enterprises. They should be offered preferences in placement of orders by natural monopolies, state corporations, federal and regional enterprises, budget grants to small business should be exempt from taxes.

I am aware that a decision has been just taken - we discussed it in a meeting with the representatives of small and medium-sized enterprises - to relieve the enterprises which had switched to the imputed income taxation of the requirement to use cash registers. I would like to thank you for passing this legislation.

True, there is one problem that should command our attention. The thing is that the laws passed contradict another law, the law on the sale of alcohol. It says plainly that alcohol may not be sold without cash registers. But let us be open-minded about this problem. We must fight alcohol abuse among the population, but what we are discussing now has nothing to do with that theme.

We know that every selling point seeks to obtain a license to sell alcohol. Obviously, they should not be located close to children's and some other kinds of institutions. We should talk about it and sort this problem out. But if we pretend that it is none of our business and that everyone will be allowed to work without cash registers with the exception of those who sell alcohol, then nearly 70% of the selling points will be excluded from the retail system and will be forced to bring the cash registers back. We do not need such lobbying on the part of those who produce these machines and the software for them. Please pay attention to this and eliminate this discrepancy.

Of course, our common and probably the most important task at the coming autumn session will be to prepare the budget for 2010-2012. I would like to dwell on that topic in more detail.

What are the fundamental features of the budgetary process that has got under way? The situation in the world, and accordingly, in the Russian economy has changed dramatically. We are living through a crisis and a high degree of uncertainty persists in the global markets. All this dictates a very careful and even a conservative approach to budgetary planning. It would be rash to count on "windfalls" in the shape of sudden changes on the market or additional revenues due to growing prices for our traditional exports.

The period between 2010 and 2012 will be one of transition from the acute phase of the crisis to a new stage of development and diversification of the domestic economy. In a way one can draw an analogy with the beginning of the 2000s when the economy was groping for new paths after the crisis of the late 1990s.

In the years ahead we are to outline the main financial parameters of a more effective and advanced economic model that we may have after the crisis. The federal budget must address that task.

In other words, we should gradually put our budgetary policy out of the crisis mode, restore normal macro-economic parameters, cut the deficit and gradually shift the accents away from financing anti-crisis measures (which are yielding and will yield results, I am sure) to a routine structure of spending with emphasis on the innovative way of development for which we have opted.

The Government is currently working to determine the key macro-economic parameters of the budget. What are the facts and assessments we proceed from? In recent years federal budget revenues have been on average 23-24% of the GDP. That is a very high indicator both for our economy and for any other economy. The windfall profits from oil and gas accounted for a large part of that growth. For example, in 2008 they topped 10% of the GDP.

It has to be admitted that such a revenue level can hardly be achieved in the foreseeable future. In 2009 budget revenue will be an estimated 16% of GDP. Assessments vary, but it will be around 16%, 15.7% or slightly more than 16%. We expect similar indicators in 2010-2012. Let me note that this is a normal and sustainable level of revenue that we can confidently count on. Let me stress that this would not require serious changes in the current taxation regime. What I would like to stress is that we have and will have the money. The question is how to make rational use of it in the current conditions, in the changed circumstances.

In drafting the budget we proceed from a moderately conservative assessment of the price of oil and gas. The 2009 budget assumes the price of \\$41 per barrel. Perhaps it will turn out to be a little higher, \\$50-55 per barrel.

The next key factor is inflation. You know that in recent weeks and months it has slowed down substantially, practically by 1.5 times compared with the same period of last year. That of course is a positive factor. But the "inflation disease" did not go away. Its symptoms have merely diminished. When the economy starts to rebound the inflation situation may deteriorate again.

To prevent inflation growing, and especially to cut inflation, first to one digit figures and then to 3-5% a year, we must above all curb the budget deficit.

Let me remind you that this year the budget deficit is 7.4%. If one counts in the so-called quasi-fiscal spending, it will be about 8%. These are the measures of the Central Bank to overcome the financial crisis. In other words, extra spending by the Central Bank.

Budget deficit must be reduced beginning from next year. I am not talking abut exact figures. We should think about it together and decide based on the finance needs of various areas of our activities: the social sphere and Government investment activities. But in any case we should seek to reduce the budget deficit.

Of course we cannot afford deficits of up to 13% that some developed economies have. As I said, we should cut the budget deficit next year and in future keep it down to 2-3%. But when I say in future, I do not even mention the timeframe. I am not going to say anything on that score, we will discuss it with you, but it is certainly a goal to work for.

I will now dwell on the key sphere of spending. In recent years our spending has been growing very fast, but on the whole I think we did the right thing because we could afford it and it was necessary to develop the social sphere, to support our citizens, it was necessary to launch new programmes - which we did - to develop the economy.

We created a stimulus for innovative activities: changes in the taxation sphere in favour of high technology, the creation of special economic zones, special funds and so on and so forth. On average we increased spending by 1.5 trillion a year. In 2005 it stood at 3.5 trillion roubles, in 2006, 4.3 trillion, in 2007, 6 trillion and in 2008, 7.6 trillion.

I would like you to take note of the next figure I am going to cite. In spite of the crisis phenomena in the economy, and considering that we had been spending freely in the preceding years, we had to increase budget spending from 7.6 trillion roubles in 2008 to 9.7 trillion roubles in 2009. One-third of the projected budget revenue was never raised because of the crisis. We cut our revenues by a third and increased spending.

As I said earlier, we can count on revenues being within 16% of GDP in the future, i.e. about 6.5-7.5 trillion roubles a year. To prevent a budget imbalance, to preserve the reserves, we will have to cut spending, but we should of course do it in a judicious and careful manner. Still, we should think about it. It is a very important and necessary decision. I would like our colleagues in Parliament and in the regions to understand it. I want to be clear: we should not allow any across-the-board mechanical cuts and we shall not allow it. In some areas we even plan to increase spending.

Basically, the decision is about the following: we should set clear priorities and make budget spending and budget programmes much more effective. In other words, everything that is not the No1 priority , everything that gives grounds for suspecting that money may not be used effectively or may be simply stolen - all this should be cleaned out of the budget.

Everything connected with the fulfillment of social obligations is top priority. That includes pensions, social benefits, demographic programmes, including the payment of mother's capital. We will remain committed to renewing education and healthcare and to finance the achievement of the goals declared in the National Projects. We should take a closer look at whether spending is effective, but we will go on with the National Projects. I am referring to payment to homeroom teachers, the development of a network of national research universities, modernization of vocational training in general as well as cancer and cardio-vascular disease programmes, the development of the blood service, promotion of the healthy way of life...