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Annual Address to the Federal Assembly of the Russian Federation

July 8, 2000, Moscow, the Kremlin

President Vladimir Putin:

Dear Yegor Semyonovich,

Dear Gennady Nikolaevich,

Dear State Duma deputies and members of the Federation Council,

Dear citizens of Russia,

In accordance with the Constitution, I present you with the Address to the Federal Assembly of Russia. It will concern priorities in state work. A great deal has already been started and is being done collectively. But there are also long-term tasks which will require intensive efforts.

We agreed with the leadership of both chambers to meet after my speech and discuss the main parameters of the Address which I am making to you. I very much hope that this discussion will help effective organization of future work.

This time, the Address is being made in the middle of the year, rather than at the beginning. And, as you know, this is because of objective circumstances – primarily the Russian Presidential elections. Only the current head of state has the right to present programme tasks to bodies of power, and only he has the real ability to organize their effective implementation.

The last half year showed that there is already quite a high level of agreement in society on fundamental issues of the country’s development. Constructive, if difficult, work has begun for legislative and executive power. The newly formed federal government is showing that it is capable of systematic and planned work. Programme documents on the socio-economic development of the country have in general been approved. The state approach to the matter is in many ways clear.

I am grateful to both the Federal Assembly and the Government for the fact that without losing any time, we have begun to prepare and implement important decisions for the country. I want to thank all citizens, everyone who supported us in these undertakings. And in the future, I count on the active participation of everyone in affairs of the Russian state.

A major event of recent months was the examination of laws that improve federal relations and change the state of affairs in the social and tax spheres. Their introduction will become a reference point of a new era in building the state, and in the rules of behaviour in the economy.

A period is beginning in Russia when the authorities have the moral right to demand that norms established by the state are observed. Perhaps the most serious problem in recent years was the unreasonable level of taxation, or one of the most serious problems. This was discussed a great deal, but nothing was done. The discussion went in a vicious circle, and few believed that the situation could change. Today the first steps have been made. New legislative parameters are established – and thus new rules are established. But work in this area, and we just discussed it with the Prime Minister, is still proceeding with great difficulty.

Introducing a single rate for income tax, reducing deductions to social off-budget funds will help to bring income out of the shadows. The weakening of the tax burden will make it possible for conscientious entrepreneurs to develop their business confidently in their own country.

It must be admitted: the dictates of the shadow economy and “grey” schemes, the wave of corruption and mass flow of capital abroad has in many ways been helped by the state itself. It has been helped by the vagueness of rules and by unjustified restrictions.

For a long time we have been trying to make the choice: to rely on others’ advice, aid and loans, or to develop relying on our own distinctive character, and own efforts. Many countries have also faced this choice.

If Russia remains weak, we really will have to make the former choice. And it will be the choice of a weak state. It will be the choice of the weak. The only real choice for Russia is the choice of a strong country. A country that is strong and confident of itself. Strong not in defiance of the international community, not against other strong nations, but together with them.

Now that we are moving forward, it is more important not to remember the past, but to look to the future. We must insure that all of us – entrepreneurs, power structures, all citizens – strongly feel their responsibility to the country. So that strict fulfilment of the law becomes the deliberate choice of all citizens of Russia.

Policies built on the basis of open and honest relations of the state with society will protect us from repeating past mistakes, and are the basic conditions of a new “social contract”.

Dear colleagues,

Before I speak of priorities and set tasks, I will mention the most serious problems that the country faces.

We have become accustomed to regard Russia as a system of bodies of power, or as an economic organism. But Russia is above all the people who consider this country to be their home. Their prosperity and good standard of living is the government’s main task. It is the task of any government! However, our home is a long way from comfort. It is still hard for many people to raise children, and to ensure a worthy old age for their parents. It is difficult to live.

We, the citizens of Russia, are becoming fewer and fewer with each passing year. For several years now, the population has dropped by an average of 750,000 people every year. And if we are to believe the predictions, and these predictions are based on real work, the real work of people who understand this and have devoted their entire lives to this, in 15 years, the number of Russian citizens may drop by 22 million.

I would ask you to think this figure over: it is one seventh of the country’s population. If the current tendency continues, the survival of the nation will be threatened. We really do face the threat of becoming an enfeebled nation. Today the demographic situation is one of the most alarming that the country faces.

The economic weakness of Russia continues to be another serious problem. The growing gap between leading nations and Russia pushes us towards becoming a third world country. The figures of current economic growth should not be any cause for comfort: we continue to live in conditions of progressing economic lag. I would ask you to pay special attention to this.

At first glance, the country’s economy does not look bad at the moment. GDP, industrial production, investment and tax collection are growing. However, economic growth, as in the recovery period of 1997, is at risk. Two year ago the apparent prosperity, which was based on large-scale state borrowing, collapsed under a massive financial crisis.

The current economic figures only look optimistic when compared with earlier ones. I want to stress this, only when compared with earlier ones! But they are very modest in comparison with other countries, which are developing, and much more quickly and more stable than we are. The current growth is only to a small extent connected to the renewal of the economic mechanism. In many ways, it is the result of a favourable external economic situation.

To digress from the text, I would like once more to return to what I said at the beginning: tax reform. I would ask the State Duma deputies to carefully look at what the Government offers in the context of what I just said earlier.

We cannot be happy with this situation. And this is not just because of our national pride, although this is also important. The issue is far more serious and dramatic. Can we hold out as a nation, as a civilization, if our prosperity continually depends on international loans and on the benevolence of leaders of the world economy?

Russia needs an economic system which is competitive, effective and socially just, which ensures stable political development. A stable economy is the main guarantor of a democratic society, and the very foundation of a strong nation that is respected in the world.

Russia also faces serious external problems. Our country is involved in all international processes, including economic globalization. We do not have the right to “sleep through” the information revolution that is underway in the world.

We cannot and must not lose out strategically. This is why the Conception of foreign policy was recently ratified, an updated Conception of foreign policy. It acknowledges the supremacy of domestic goals over foreign ones.

The independence of our foreign policy is in no doubt. The foundation of this policy is pragmatism, economic effectiveness, and the priority of national tasks. But we still need to work on making these principles the norm of state life.

The cold war is a thing of the past, but to this day there is a need to overcome its difficult consequences. These are attempts to infringe on the sovereign rights of nations in the guise of “humanitarian” operations, or as they say nowadays, “humanitarian” intervention, and difficulties in finding a common language in issues which represent a regional or international threat.

Thus, in the conditions of a new type of external aggression – international terrorism and the direct attempt to bring this threat into the country – Russia has met with a systematic challenge to its state sovereignty and territorial integrity, and found itself face to face with forces that strive towards a geopolitical reorganization of the world.

Our efforts to save Russia from this danger are often interpreted in a subjective and biased manner, and serve as the occasion for various types of speculation. An important area of foreign policy activity should be ensuring objective perception of Russia. Reliable information on the events in our country is a question of its reputation and national security.

A response to this and many other challenges are impossible without strengthening the state. Without this, it is impossible to solve another national task. And although strengthening the state has for some years been proclaimed as the goal of Russian policy, we have not moved beyond declarations and empty talk. Not at all!

Our most important task is to learn to use these tools of state to ensure freedom – freedom of personality, freedom of enterprise, freedom of developing institutions of civil society. The debate about the ratio between force and freedom is as old as the world itself. It continues to cause speculation on the themes of dictatorship and authoritarianism.

But our position is very clear: only a strong, or effective if someone dislikes the word ‘strong’, an effective state and a democratic state is capable of protecting civil, political and economic freedoms, capable of creating conditions for people to lead happy lives and for our country to flourish.

Dear deputies, members of the Federation Council,

The root of many of our misfortunes is in the lack of development of civil society and in the authorities’ inability to talk and work with it. The authorities constantly go to extremes – they either ignore society, or become excessively protective of it.

At the same time, the idea exists that everything in Russia depends on the regime. The regime really does answer for everything. But a great deal also depends on Russian citizens themselves. The development of the country is in many ways determined by the level of their responsibility, the maturity of political parties, social organizations, and the civic position of the media.

Over the past decade, fundamental changes have taken place in the country – rights and freedoms of the individual are guaranteed by the Constitution, a democratic political system has formed, and a multi-party system has become reality. Russian citizens vote for the President, State Duma deputies, governors, mayors, and bodies of self-administration.

However, the letter of the law and real life are often quite different things. Only the framework of a civil society has been formed in Russia. Collective, patient work is now required for it to become a full partner of the state. We are not always able to combine patriotic responsibility for the destiny of our country with what Stolypin once called “civil liberties”. So it is still hard to find a way out of a false conflict between the values of personal freedom and the interests of the state.

At the same time, a strong state is unthinkable without respect for people’s rights and freedom. Only a democratic state can ensure a balance of interests of personality and society, and combine private initiative with national tasks.

In a democratic society, a constant link between the people and government is provided by political parties. Thanks to elections, this important tool has today received the greatest possibilities for development. Without parties, it is impossible to carry out the policies of the majority, or protect the position of the minority.

Against the background of centuries-old traditions of parliamentarianism and multi-party systems in other countries, the shortcomings of our party system are particularly noticeable. A weak government benefits from having weak parties. It is easier and more comfortable for it to live by the rules of political bargaining. But a strong government is interested in strong rivals. Only in conditions of political competition is serious dialogue possible on the development of our state.

Russia needs parties which have mass support and stable authority. And they do not need parties of officials which are attached to the government, let alone which replace it. Experience has shown, and we have known this for the past several years, that formations like this perish immediately, as soon as they leave their incubator for a competitive environment.

Today, the time has come to prepare a law on parties and party activity, and in fact I believe this topic is already under discussion at the Duma. It seems to me that we need to work on this more actively. Perhaps only social and political associations should put forward candidates for President. I understand that this is a serious issue, and it needs separate wide discussion.

The current state of the trade union movement is another matter. Tendencies of formalism and bureaucratization have also affected these groups of citizens. In new conditions, trade unions should not take on state functions in the social sphere. This should not be done. Citizens of Russia do not need more intermediaries in distributing social welfare, they need professional control of fair labour contracts and observing their conditions.

This means that the tasks of trade unions is to protect the rights of hired employees in the state and private sectors, study the structure of the market, organise legal study and search for priorities in the sphere of training personnel. The field of work here is enormous, and the state alone cannot deal with it. And the state should not work alone here. This is where it should work together with trade unions.

In the establishment of civil society, the media plays an exclusive role. We talk about this problem a great deal. By standing up for the right to freedom, Russian journalists have often risked their own career – they have even risked their lives! Many of them have perished.

Nevertheless, a free press has been established in Russia. However, the Russian media, like society as a whole, is still in the process of being established. This needs to be said directly. This is where all the problems and the “growing pains” of the country are reflected, as in a mirror. Because they are working here, in the country, and not observing the events from an island somewhere. The way society is, the way the government is – this is the way journalism is here. So when people tell me: “Deal with the media, do this and that,” I reply: let us deal with society as a whole, and then the media will change. But without a truly free media, Russian democracy cannot survive, and a civil society cannot be created.

Unfortunately, we have not yet been able to develop clear democratic rules that guarantee true independence of the “fourth column”. I want to stress this – true independence. Journalistic freedom has become a coveted item for politicians and major financial groups, and a convenient tool for war between clans.

As the President of the country, I consider it my duty to point this out to society.

Censorship and inference with media activity is prohibited by law. The government strictly keeps to this principle. But censorship can come elsewhere than from the state, and inference is not just always administrative. The economic ineffectiveness of a significant part of the media makes it dependent on the commercial and political interests of its owners and sponsors. It makes it possible to use the media as a way to score points off rivals, and sometimes even to turn it into a means of mass disinformation, a means of fighting the state.

Therefore, we are obliged to guarantee journalists real, not illusory, freedom, and create legal and economic conditions in the country for civilized information business.

Freedom of speech was and remains a firm value of Russian democracy. This is our fundamental position.

I would also like to discuss another important topic.

I am certain that the development of society is unthinkable without agreement on common goals. And these goals are not just material ones. Spiritual and moral goals are no less important.

The unity of Russia is strengthened by the patriotism inherent in our people, by cultural traditions and common historic memory. And today in Russian art, in theatre and the cinema, there is a growth of interest in Russian history, in our roots and what is dear to us all. This, without doubt – I, at any rate, am certain of this – is the beginning of new spiritual development.

The democratic organization of the country and the new Russia’s openness to the world, do not contradict our uniqueness or patriotism, and do not hinder us from finding our own answers to issues of spirituality and morals. And we do not need to look for a national idea specially. It is already ripening in our society. The most important thing is to understand the kind of Russia that we believe in and the kind of Russia we want to see.

With all the abundance of views, opinions and the diversity of party platforms, we have had and continue to have common values. Values which join us and allow us to call ourselves a single people.

Dear colleagues,

Moving to priorities in economic policy, we must first of all examine what has caused the current economic growth, and whether it is stable, and how vulnerable to external influences. I talked about this at the very beginning, and now I would like to go into more detail.

On the one hand, current figures are partially the result of the favourable foreign trade situation. Everyone in this hall understands what I am talking about. On the other hand, the behaviour of enterprises and market subjects is beginning to change, and they are increasingly guided by effective demand, and reduce the costs of production. This also cannot be ignored, it is a fact.

At the same time, there is the danger that these tendencies cannot be consolidated here. The deeper reasons for the instability of our economic development remain the same, and the basic principles by which the economy works change slowly here. These problems lie in excessive intervention by the state in spheres where it should not be present, and in its absence where it is necessary. Today, the state’s involvement is unnecessary in property, enterprise and consumption to a certain extent. But on the other hand, the state remains passive in creating a common economic space for the country, in compulsory implementation of the law, and protecting property rights.

The main obstacles to economic growth are high taxes, corruption among officials and extensive crime. Solving these problems depends on the state. However, an expensive and wasteful state cannot lower taxes. A state prone to corruption, with unclear limits of jurisdiction, will not save entrepreneurs from corrupt officials and the influence of crime. An ineffective state is the main reason for the long and deep economic crisis – I am absolutely sure of this – and we know well the manifestations of this crisis.

Very many national enterprises remain uncompetitive. They have survived mainly thanks to the devaluation of the rouble, reduced tariffs on energy resources, non-payment and barter. The raw-material orientation of the market remains. Budget revenues depend to a large extent on the dynamic of world prices on energy resources. We are losing out in competition on the international market, which focuses more and more on innovation sectors, on a new economy of knowledge and technology. A significant part of the Russian economy remains in the shadows.

One of the signs of the state’s weakness, its inconsistency in carrying out necessary changes, is the excessive accumulation of state debt, particularly foreign debt. Despite being reconstructed several times, the burden of state debt represents a threat to the country’s development. Accumulated debts force us to spend not less than a third of budget revenues on servicing them and paying them off. The problem is that the debt is not getting any smaller. Reconstruction is such that the debt does not get smaller, it only grows.

We have become hostage to an economic model based on populist policies. We tried to treat diseases by covering them up. We constantly delayed passing systematic and fundamental decisions designed to have long-term consequences.

It is necessary to learn lessons from our experience and admit that the state’s key role in the economy is undoubtedly the protection of economic freedom. Our strategic line is as follows: less administration, and more entrepreneurial freedom – freedom to produce, trade and invest.

The essence of state regulation in the economy is not in increasing administrative tools, not in state expansion in individual industries (we have already gone through this, and it was ineffective), and not in supporting selected enterprises and market participants, but in protecting private initiatives and all forms of property.

The government’s tasks are to fine-tune the work of state institutions that ensure the work of the market. We will not be able to achieve stable development without a truly independent legal system and an effective system of law-enforcement bodies.

I want to particularly stress this: no national programme will be successful if we do not ensure a single economic and legal space. This is an axiom for a federal nation. But even now, there are restrictions on economic activity in the county, and we see them coming from everywhere – from federal, regional and local power bodies.

Federal power is responsible for common conditions of economic activity in the country. But territorial bodies still often introduce bans on export of grain, restrict trade of alcohol, and hinder banks that are not “theirs” from opening branches. Barriers are created to free circulation of capital, goods and services. This is an absolute disgrace! It seems to be profitable. In fact, it leads to catastrophe. In Europe, many nations agreed in Rome in 1957 on free movement of goods, people and services. This all works well. But we cannot achieve this within a single country.

Any actions by regional powers directed to limiting economic freedom must be stopped as unconstitutional. Officials responsible for this should be punished. Regions should not compete for authority, but for attracting investment and labour resources. This can only be done by improving, not by worsening conditions of economic activity.

It must be admitted that the state will not be able to stop participation in several sectors of our economy for some time yet. I mean direct participation by the state. It will not be able to, and should not stop – in sectors such as the defence and industrial complex, for example. Strategically important industries will remain under the constant attention of the state.

Dear deputies, members of the Federation Council,

Unfortunately, the business climate in our country is improving too slowly, and remains unfavourable. Taxes and entrepreneurial risks are high. Mechanisms of registering enterprises are complex, and checks are endless. The functions of bodies of state administration have in a number of cases been combined with the functions of commercial organizations. This situation is intolerable and must be changed. More active work is needed from the Government, and the Prime Minister. We know that in some central departments there is a direct combination of economic and administrative functions. This is absolutely unacceptable. It goes against common sense and the existing legislation.

Firstly, protection of property rights needs to be ensured. The state will guarantee shareholders access to information about the activity of enterprises, and restrict the possibility of “laundering” their capital, and asset withdrawal. Citizens’ property rights need to be protected, and their guarantees ensured of ownership of housing, land, bank holdings, and other movable and immovable property. It is important to establish the legal bases of the right to private property in areas where it has not yet been confirmed, above all on land and real-estate. These issues are serious ones. They need to be approached carefully, and we need to move towards solutions. These issues are an area of joint work between the Government and the Federal Assembly.

The second area is ensuring equality of conditions of competition. Today the state puts some enterprises in a profitable position – tariffs on energy resources are lower for them, they are allowed not to pay debts, and they enjoy numerous privileges. But other enterprises, working in formally equal conditions, are discriminated against, and essentially pay for the privileges of the former. Therefore, all unjustified privileges and preferences should be cancelled, direct and indirect subsidies to enterprises. Whatever the justifications for them are. Justifications will always be found. It is necessary to ensure an equal approach in distributing state funds, licenses, quotas, and do away with the selective use of bankruptcy procedure. This is an extremely important and very painful sphere of state activity. In some regions, it has simply become a tool for squaring accounts with political and economic rivals.

The third area is freeing entrepreneurs from administrative pressure. The state should gradually stop the practice of excessive interference in business.

The ability of officials to act as they see fit, and arbitrarily interpret legislative norms in both the centre and the regions oppresses entrepreneurs and creates an environment for corruption. We need to ensure that laws of direct action are applied, to reduce department instructions to a minimum, and remove ambiguity in interpreting normative documents. And furthermore, to simplify the procedure of registering enterprises, expert examination, coordinating investment projects and so on. Many people here today probably know what this entails, and have done this themselves or observed how these issues are solved in this country.

The fourth area is reducing the tax burden. Today, the tax system is conducive to mass tax avoidance, moving the economy into the shadows, reducing investment activity, and ultimately causing a drop in the competitiveness of Russian business. This means a drop in the competitiveness of the Russian state. The first step to reform the tax system has been made: Let us move further along this path. If you have noticed, I am returning to this problem for the third time.

The current customs system can also not be called effective. There is a myth that by manipulating tariffs, you can protect Russian commodity producers. To be quite honest, I also used to think this myself. However, with the current level of customs administration, and I want to stress this, this system to a large degree only protects and encourages corruption. So the customs system needs to be simplified fundamentally, and tariffs need to be unified.

The fifth area is the development of the financial infrastructure. The bank system should be freed of ineffective organizations. There should be transparency of banking activity. The stock market should become an effective mechanism for mobilizing investments, and directing them to the most promising sectors of the economy.

The sixth area is a realistic social policy. I say the sixth area, although in its importance it could of course have been put in first place. A policy of general state paternalism is economically impossible and politically inadvisable today. Rejecting this is dictated by the need for the most effective use of financial resources, and to create stimuli for development, to liberate human potential, and make people responsible for themselves and for the welfare of their families.

Social policy is not just aid for the needy, but also investment in the future of people, in their health, and in their professional, cultural, and personal development. This is why we will give priority to developing the spheres of health, education and culture.

The current system of social welfare, which is founded on non-specific social benefits and privileges, is organized in such a way that it scatters state funds, and allows rich people to enjoy social benefits at the expense of the poor. Formally, free education and health is actually paid for, and often inaccessible for the poor, child benefits are low and not paid for years, and pensions are meagre and not tied to real incomes.

The state lie has become firmly established, and it will probably be appropriate to talk of this now that we have all gathered here: we pass numerous laws, knowing in advance that they are not provided for by real financing. We make various decisions simply because of the political situation. We have no other choice but to reduce excessive social obligations and strictly follow the ones we keep. Only this way can we restore the people’s trust in the state.

A very important national task is to ensure the financial stability of the pension system. The state is obliged to prevent a crisis caused by the swift ageing of Russia’s population. To achieve this, it is necessary to introduce mechanisms of accumulative financing of pensions. We need to move to this system, carefully, step by step, but we definitely need to move in this direction.

Social policies will be conducted on the principles of accessibility and acceptable quality of basic social benefits. And they will above all provide help to those whose incomes are significantly lower than the subsistence level. Ministers’ children can do without children’s benefits, and bankers’ wives can do without unemployment benefits.

Dear colleagues,

We have convinced ourselves: the authorities’ indecision and the weakness of the state will bring economic and other reforms to nothing. The authorities must be guided by the law and the single executive power vertical that is formed in accordance with it.

We have created separate “islands” of power, but have not built reliable bridges between them. We have yet to build effective cooperation between different levels of power. We have talked a great deal about this. The centre and the territories, regional and local authorities are still competing among each other, competing for power. And their often mutually destructive fight is observed by those for whom disorder and corruption is advantageous, who make use of the lack of an effective state for their own goals. And some would like to keep this situation in the future.

The power vacuum has led to state functions being seized by private corporations and clans. They have acquired their own shadowy groups, groups of influence, dubious security services which use illegal means to receive information.

At the same time, state functions and state institutions differ from entrepreneurial ones in that they should not be bought or sold, privatized or transferred for use or lease. Professionals are needed in state service, for whom the only criterion of activity is the law. Otherwise, the state is opening the path of corruption. And the moment may come when it is simply transformed, and ceases to be democratic.

This is why we insist on a single dictatorship – the dictatorship of the Law. Although I know that many people do not like this expression. This is why it is so important to indicate the limits of the area where the state is the full and only owner. To clearly say where it is the final arbiter and to indicate the spheres where it should not become involved.

The engine of our policy should become enterprising and responsible federal bodies of executive power. The basis of their authority is the constitutional obligation to ensure the transparency of the executive power vertical, a state mandate of trust that is gained as a result of democratic Presidential elections, and a common strategy of domestic and foreign policy.

But without coordinated work with regional and local authorities, the federal bodies of power will not achieve anything. Local power should also become effective. Essentially, this involves gathering all state resources to implement a common strategy for the country’s development.

It must be admitted – federal relations in Russia are incomplete and undeveloped. Regional independence is often interpreted as a sanction for disintegration of the state. We talk about the federation and its consolidation all the time, and have been talking about this for years. However, it must be admitted: we still do not have a full federal state. I want to stress this: we do have a decentralized state.

When the Russia Constitution was passed in 1993, federal statehood was seen as a worthy goal, which it was necessary to work on thoroughly. At the beginning of the 1990s, the centre gave the regions a great deal. It was a conscious policy, although to a certain extent made without any choice. But it helped the Russian leadership to achieve the most important thing, and I think it was justified: it helped to keep the Federation within its borders. This must be admitted. It is always easier to criticize what happened before us.

However, the authorities in certain subjects of the Federation soon began to feel the stability of central power. And they quickly made a response. But I want to draw your attention to the fact that the reaction came not from the centre, not from Moscow, but from cities and villages. Bodies of local self-administration also began to take powers on themselves, mainly the powers of Federation subjects this time. Now all levels of power suffer from this disease. To break this vicious circle is our common, sacred task.

An extreme example of unsolved federal problems is Chechnya. The situation in the republic has become so difficult that its territory has become a platform for the expansion of terrorism into Russia. The initial reason here was also the lack of state unity. And Chechnya in 1999 reminded us of mistakes made in the past. And only an anti-terrorist operation could overcome the threat of the collapse of Russia, and professional military helped to maintain the state’s dignity and integrity. They deserve our deepest respect. But at what price…

Dear members of the Federation Council,

Dear State Duma deputies,

One of our first steps in strengthening federalism was the creation of federal districts and the appointment of representatives of the Russian President to them. The essence of this decision was not in consolidating the regions, as this is sometimes perceived or portrayed, but in consolidating the structures of the Presidential vertical of power in the territories. It was not designed to change administrative and territorial borders, but to increase the effectiveness of power. Not to weaken regional power, but to create conditions to consolidate federalism.

I want to particularly stress: with the creation of districts, federal power did not get further away from the territories, it got closer.

Public opinion ascribes dangerous intentions to the President’s federal representatives. They are supposed to be both “swords of vengeance” and bureaucratic intermediaries between the centre and the regions. In fact, by reducing the staff of federal officials in the regions, we want to ensure they are mobile and competent. By clearly defining the limits of jurisdiction of the federal representatives, we make their work transparent for regional administrations and the population of territories. By reducing doubled-up functions, we personify responsibility. This decision undoubtedly reinforces the unity of the country.

Federal representatives will of course assist in effectively solving the problems of their districts. But they do not have the right to intrude on the sphere of competence of the elected heads of regions. In their work, representatives will be guided by the law alone and the powers given by the law.

Our second step determines the possibility of federal intervention in situations when local bodies of power infringe the Russian Constitution and federal laws, and violate the common rights and freedoms of Russian citizens.

In the territories today, a state body of official can refuse to carry out a court decision that declares a law or another normative legal document to be unconstitutional or contrary to federal legislation. It can continue to use documents that a court declared to be invalid. This is the practice of our lives, all around. This abasement of the Russian legal system as one of the federal authorities that acts on the basis of the Constitution is intolerable. This is in fact the external manifestation of what I have been talking about. The state here is not federal, but decentralized.

Federal power and the Russian President should have the legal ability to establish order here. And regional leaders should have the right to influence local power bodies if they make unconstitutional decisions and infringe on citizens’ rights. We must not weaken the powers of regional authorities. This is the link on which federal power must rely.

But these institutions of intervention exist in many federal states. They are used very rarely, but their existence is a reliable guarantee of precise implementation of the Constitution and federal laws. In fact, even now, at the discussion stage of this problem, the Russian regions have already begun to establish order. We can see clear results in certain territories.

Our next step is reform of the Federation Council. And this is also a step towards the development of democracy, and professional foundations of parliamentary activity.

Changing the principles of forming the Federation Council poses the question of organizing permanent dialogue between leaders of subjects of the Russian Federation and heads of state on the main problems of state life, on a form of regional participation in preparing and passing important national decisions. This form may become the State Council under the Russian President, which has been discussed by some governors, and as the President, I am prepared to support it.

I would also like to mention another problem – the war of mayors and heads of municipal formations with regional leaders, which we can see everywhere. Only in rare cases can this war be seen as an assertion of the interests of local self-administration as an institution of power. Local self-administration still begin too often with mayors and ends with them. And thus, personal ambitions and attempts to gain more power should not be confused with protecting people’s real interests.

Increasing the responsibility of leaders of Federation subjects and legislative assemblies should be accompanied by an increase of responsibility among heads of municipal formations. Of course, this does not deny the necessity of further development of local self-administration. It is under the protection of the Federal Constitution and is one of the fundamental bases of Russian sovereignty of the people.

Dear colleagues,

Today, above all we set ourselves the task of establishing order in bodies of power. But this is not the final goal, only the first stage in state modernization. Unifying the resources of federal, regional and local authorities is necessary for solving other complex tasks. The main tasks are:

Improving the political system and building an effective state as the guarantor of stable social development and observance of human rights;

Bringing the capabilities of Federation subjects into line to ensure that citizens of the country have a full range of political and socio-economic rights;

Creating legal guarantees of development of the Russian economy as an economy of free enterprise and business initiative for citizens, and ensuring precise and effective implementation of economic strategic throughout the territory of Russia.

These three tasks will be solved consecutively to strengthen our state system. And to achieve this, we must already begin to consolidate efforts at all levels and branches of power.

To conclude my speech, I would like to remind you that everyone in state service has a responsibility to the state and to all of Russian society. This responsibility is specified by mandate for deputies, governors and members of Government. Despite the difference in their positions, they all have a common debt. It is a debt to the people, a debt to our country.

In Russia today, promises are not enough. Promises have been made many times, and they have all passed their expiry date. Decades of difficult and unstable life are a long enough time to demand real changes for the better. The Russian government must achieve changes soon.

We all understand how difficult it is to achieve this goal. But I am certain that we have enough sense and will.

If this is so, there will be a result.

And then we will have stability and national progress.

Russia will have success and prosperity.

Thank you very much for your attention.

July 8, 2000, Moscow, the Kremlin