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Vladimir Putin: Good afternoon.

Today I would like to discuss the problems of the Central Federal District. The main issue I would like to discuss, or at least one of the main issues, is the financial aspects of the ongoing modernisation of federal relations and local government.

The status of the financial and resource base of these reforms is the central issue. It remains the most significant and the most contentious issue in the discussion among different levels of government. Today I propose to dwell on several fundamental matters.

First, you know that the Russian Government has already approved the bill On the General Principles of Organisation of Legislative (Representative) and Executive Bodies of State Power in the Regions of the Russian Federation (we specifically discussed that issue at the Presidium of the State Council at the request of some of our colleagues) and the bill On the General Principles of Organisation of Local Government. Both documents adjust and expand the economic powers of the regional and municipal authorities.

What is important is that the proposed transformations put a permanent seal on the sources of revenue and the principles of levelling the budget resources of both the regions and municipalities. Besides, the regions and municipalities will be receiving subsidies from federal and regional sources to exercise the government powers delegated to them. Thus the provisions of these bills are geared to solving the main task: bringing the regional and local budgets in line with their expenditure commitments.

Of course the new approach to the delimitation of powers would necessitate amendments in the Budget and Tax codes, especially since the bill contains a new chapter that determines the principles of managing and handling the financial resources and government property of the regions of the Russian Federation.

In connection with this, I would like to exchange opinions and discuss with you the future of inter-budgetary relations and the funding of activities that are under joint jurisdiction.

The sphere of joint jurisdiction is equally important for the federal centre and for the regions. But federal regulation will be confined only to the framework or will be ruled out altogether on a significant number of issues. In connection with this, I would like to hear from you in more detail about the proposed actions of the regions in light of the newly passed laws.

Next. Obviously, it is largely up to the federal government to provide incentives for the formation of the revenue base in the regions and municipalities. But there are many financial levers at the local level as well. One of them – and the most powerful – is attracting investments, both domestic and foreign.

By the way, investment is one of the most critical issues for the Central Federal District. It does not have raw materials resources of its own, which forces the regions to look for other innovative ways of development.

The delimitation of financial powers will have a direct impact on the state of the regional and local economies. And that is the third area I would like to draw your attention to. After the issue of delimitating powers is sorted out, the responsibility of local authorities for effective economic development will increase.

In connection with this, it would be useful to discuss the future of economic interaction among the regions. Your district already has seen some qualitative changes in these relations. For example, Moscow has invested more than $320 million in the economies of the regions in central Russia. And it did so for the benefit of its own economy and the economy of the district.

In conclusion I would like to note that a solid financial basis of the exercise of powers is not an end in itself. The ultimate goal of the measures in this area is to enhance the well-being of the people, regardless of the region where they live.

Not all the regions that form the Central District are developing at the same rate. In fact, the differences among the regions here are significant.

And people’s standard of living in most regions of the Central District is unfortunately below the national average, with the only exception being Moscow.

Besides, the demographic situation in the Central District is among the worst in the country. The mortality rate here is double the birth rate.

I believe that the financial problems or lack of a clear delimitation of powers does not explain all these alarming facts. And that gives us reason to think about how effectively we use the available resources and powers.