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Vladimir Putin: Good afternoon.

We met with you not long ago in connection with the tragic events in Moscow. Today we are holding a working meeting on which we had agreed previously. It is very important for the country because today we will discuss a conceptual issue connected with state building.

You know that a year and a half ago, in July, I think, I signed a decree and a commission was created to work on delimitation of the powers between the municipalities, regional and federal governments. All these problems had come to a head. And before introducing them at the State Duma, I would like to hear your opinions on these problems and know your vision of the proposals contained in the draft law. It has been discussed by the broad public, in the media and at the State Council. I am aware that hearings on the issue have been held in Parliament. In short, a major national debate on these problems has taken place in the country.

On the basis of such a profound and all-round discussion the commission has prepared corresponding bills. I must say that the commission has done a huge amount of work and analysed more than 250 laws. That work was conducted jointly with the regions, representatives of the regional authorities and municipalities. And anticipating our conversation I would like to dwell on the key provisions of the bills.

The most important thing is that the bills would significantly decentralise power where it is necessary, on the issues which cannot be effectively solved from Moscow or even from the level of regional governments. It is necessary to put in place reliable legal mechanisms that ensure the independence and responsibility of the regional and local authorities.

Independence and responsibility within clearly circumscribed powers. On the one hand, we should draw a line between the obligations of the regions and local government to the citizens and the state. On the other hand, we must ensure a uniform approach to the settlement of relations between the regional and local authorities and between them and the federal government.

I think it is a fundamental and fair requirement that the rules of relations between regional and local governments be based on the same principles as the relations between the federal centre and the regional government.

The core of these bills is to seal the rules and mechanisms that determine the rights, duties and responsibilities of the federal centre, the regional and local governments.

The rules boil down to the following. The so-called autonomous powers of the regional and local authorities will be determined exclusively by the Constitution and the two bills that are before you. These powers must be financed exclusively from regional and local budgets.

In order to fulfil their mandates, the regional and local budgets must envisage corresponding sources of revenue. That would probably require additions to the Tax and Budget codes. I know that the State Duma deputies have their own ideas and fears about this lest these changes in the Tax and Budget codes come too late. And they would like to synchronise work on these documents as regards the delimitation of powers and financial support of the exercise of the rights and performance of obligations.

The second problem is the delegation of responsibilities. Those who have worked in the regions know what it is. I know from my own experience when, during the course of the year while implementing the budget, problems start being palmed off on you from above, and regional governments or local governments are saddled with tasks they had not suspected would fall to them, with nothing being said about how the fulfilment of these tasks will be funded.

The bills that are before you establish that delegated responsibilities must be funded only by targeted subventions from the higher-level budget. If the higher level of government has encumbered the lower level with some problems, it should make sure to finance the solution of these problems.

Now a few words about the development of local government. In spite of the constitutional provisions there are still regions where local government is absent as an institution. In some it proceeds against the law. Some regions have already established genuinely positive models, positive models of local government. Such examples can be cited.

In order not to repeat mistakes we had to take into account both the positive and the negative experiences and minimise the conflicts that flare up all the time and that harm people. The authorities that are closest to the people are local authorities. The municipalities bear the brunt of many difficult social and economic problems.

I believe that the overall principles of territorial organisation of municipal government must be established by the federal law. Determining the boundaries of municipalities, merging or separating concrete municipal entities must be the prerogative of the constituent entities of the Russian Federation and the citizens who live in the cities and communities. Likewise, it is up to regional governments to take into account regional features, historical traditions and cultural features.

These are some of the issues I wanted to touch upon. I am sure that many more issues will be raised during the discussion today.

The question we are to discuss today is extremely important for the nation. It is in fact about the building of the state. You, the people elected directly in the regions often visit your regions and surely know these problems. The solution of these issues ultimately rests with you. And, as in the case of the package of laws on judicial reform, I would like to hear your opinions and take them into account, and if you have any remarks I would like to hear them before the bills are introduced to the State Duma.