MOSCOW, RUSSIA - Today’s meeting of "The Mercury Club" at World Trade Centre in Moscow focused on the issue of “Topical problems in economic relations between the center and regions of the Russian federation: finding ways out”. The representatives from various spheres of knowledge (official authorities, business, science) marked major aspects and sore spots in the development of different subjects of the Russian Federation. Particular attention was paid to the formation of the federal budget and the decentralization of Russian economy.

The session was conducted by President of the Mercury club Yevgeny Primakov. The focal point in his speech was the latest tendencies in fiscal policy of the Russian Federation. In his turn deputy head of Ministry of Economic Development and Trade Andrey Klepach announced 2 year-long state forecast of Russian regions socioeconomic development. According to the data of Ministry of Economic Development the public deficit in the subjects of the Federation is expected to remain at the level of 700-800 billion rubles per year which is approximately equal to 1 % of Russia's GDP.

“We are now witnessing general reallocation of duties from the federal center towards the regions. This process had started even before the adoption of Presidential Decrees, but the severity of carrying out the these decrees regarding the budget sector wages, in education sphere and health care service in particular, lies heavily on regional budgets and mandatory health insurance system. As a result, it creates substantial budget deficit”, - said Klepach.

At that deputy minister underlined that pay rates in public service in neighboring regions differ dramatically. In this situation, it is necessary to set standard social wages; it’ll assure the same payment for the same work in different subjects of the Federation.

First deputy chairman of Committee on the Budget and Tax of the State Duma of the Russian Federation Oksana Dmitrieva noted that current policy of federal center regarding regions has to be modernized.

“At the moment, we have not defined clear strategy of regional policy. Either we shift our productive power in the border areas, or try to fight with the centralization, or suddenly remember that one can easily make the recipient region from the “donor”. In my opinion, it is necessary to redirect our resources towards the areas that have satisfactory infrastructure facilities and human resources”, - said Dmitrieva.

CPRF leader, Gennady Zyuganov stated principals of fiscal federalism (administration of budget equally between the local government, the regions and the center) as major tool required for solving the problem of depressed regions.

“Declaration of a strong foreign policy course has yielded results that we are all proud of. But, to my thinking, without absolutely different internal fiscal, economic and regional policy it will be extremely difficult to hold these positions. I’d like to remind you that in 1999 there were 34 “donor” regions, 22 in 2006, and last year the amount decreased to 11. As the matter of fact, the degradation of the subjects of the Russian Federation is evident”, - described the situation in Russia Gennady Zyuganov.

LDPR head Vladimir Zhirinovsky suggested alternative way to economic prosperity of the subjects of the Federation. “Regions will start to develop only if we have them enlarged. Let’s leave only the subjects with population at least 3 million, so that the country will have 30 or 40 regions instead of 85”, - said Zhirinovsky.

Sergey Valentej, Scientific Advisor in Russian University of Economics named after G. V. Plekhanov, called for a state to transmit to the regions not only the funds for general needs, but also to determine the potential for growth that’ll allow to appoint budget donations.

“We have full-fledged complex of federal subjects that are stagnating, e.g they don’t show neither growth nor digress. In my judgment this is the worst situation possible”, - complained the professor.

Former chief of VGTRK, journalist and political activist Oleg Poptsov made even more pessimistic point regarding the situation in Russia’s economy.

“We’ve arrived to catastrophic result of the development. GDP growth in 2014 will be only 0.5%, and this fact is presented as prove of economic success. In comparison, GDP growth in Kazakhstan is foreseen to be 6.6%”, - said Poptsov.

The session was also attended by Deputy Minister of Regional Development of Russia Michael Kruk, Head of Research Center of Federal Relations and Regional Development in Institute for the Economics RAS Euvgeny Buchwald, General Director of "International Centre for Regional Development" Igor Melamed, RAS Advisor (IMEMO RAS) Ivan Korolev and others.

In conclusion, director of the Mercury club Valery Kuznetsov promised that the results of the discussions will be presented in capsulated format as a report to the country's top leadership.

For more information on this article, please contact Yulia S. Ivanova, WTC Moscow, at YSIvanova@wtcmoscow.ru.