Table of Contents

European Integration in a Global Economy

European Integration in a Global Economy

CESEE and the Impact of China and Russia

Edited by Ewald Nowotny, Peter Mooslechner and Doris Ritzberger-Grünwald

The expert contributors focus on global imbalances and accompanying policy challenges, competitiveness and trade, the sustainability of current growth strategies, and banking and financial stability in the light of the global economic and financial crisis. They provide a multi-disciplinary assessment, combining the views of high-ranking central bankers, policymakers, commercial bankers and academics, and demonstrate that a broad view of European economic integration is crucial given that spillovers and contagion were major issues of the recent economic crisis.

Chapter 12: Economic problems facing the next Russian president

Sergey Aleksashenko

Subjects: economics and finance, international economics, money and banking


Although many Russian politicians may believe that Russia is not really part of Europe and definitely not part of the integration process, nevertheless, Russia is connected to Europe. For example, in 1990 it was possible to exchange the Soviet ruble, which was not in short supply in the Soviet Union, in Vienna. In 1992, when the Soviet Union collapsed, Finland experienced perhaps the most severe recession because of the collapse of trade with the Soviet Union, because of problems with bilateral clearing and so on. So Russia will definitely influence what is going on in Europe, and the next Russian president will face some of the problems that will affect Europe in general. Although the Russian presidential elections are scheduled for March 2012, the outcome seems to be clear to everyone – Vladimir Putin will be announced as the winner and in early May he will take his place in the Kremlin. His aim will be to stay there for six or twelve years or maybe even more, but, unlike his first term in the Kremlin, the 2010s will be much more difficult for him, with the economy no longer booming after the transformation of the 1990s and no longer recovering from the severe financial crisis of 1998. Rather, he will face many problems that he has not had to deal with before: slow after-crisis recovery, the demographic trap, growing dependence on oil, a lack of investment, a weak financial system and, finally, the need for political change. The 2008–09 crisis was a severe experience for Russia. The deep recession during the global crisis resulted in minus 10.5 per cent in GDP from peak to bottom. At the time of writing, many Russian politicians believe that the crisis is over. Of course, if overcoming the crisis is tantamount to passing over the bottom point, that happened sometime in spring 2009; but if the crisis is deemed to have been overcome once the economy reaches the pre-crisis maximum, that will occur in Russia in early 2012. If we say that the crisis will not have been overcome until the Russian economy returns to the trend line, this moment may be some time away because the Russian economy has not been growing very fast after the crisis. According to Rosstat data, output has been growing between 3.5 and 4.5 per cent on average, and, what is more important, the recovery is not stable. The Russian economy may grow for two quarters but then halt for one quarter, and may then grow again and stop again. And this is really worrying, as it would imply that the economy has lost its momentum (see Figure 12.1).

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