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President of Russia Dmitry Medvedev: Good afternoon, colleagues,

I wanted to meet with you in order to discuss the most relevant issues today. But first of all, I want to congratulate you on the results of the recent municipal elections, in which, as I understand it, most of you achieved victory. Of course, I also want to talk about the issues you deal with as members of the Tula Region Towns’ and Villages’ Representative Assembly.

The local government assemblies bring together people from all different walks of life, not professional parliamentarians, but people who are close to the grass roots, people involved in ordinary work. Among you are doctors, teachers, machine operators, housewives, businessmen, social sector workers, in short, people from the widest range of backgrounds, and this is perhaps a very good thing.

I recently saw a very interesting statistic. It turns out that almost a third of municipal heads in our country are women, although women are considerably less well represented at the higher levels of government. I already said, and want to repeat now, that this situation means women get the hardest job, because running small municipal entities, often on very tight budgets and in very difficult circumstances, is a difficult task indeed.

Elections took place in practically all of the country’s regions on March 1. Summing up the results, what I want to say is that, in principle, these elections have shown that our political system is stable in its functioning. It is not without its problems, but on the whole it is stable. I also note that the most active participants in these elections were the parties represented in the State Duma, that is to say, United Russia, the Communist Party, A Just Russia, and LDPR [Liberal Democratic Party of Russia].

What does this tell us? It tells us that our political system is taking shape, coming together, and maturing.

I think that the deputies representing these big parties can actually do a lot more for our citizens than deputies representing small parties, or independent politicians. In this regard, I think the elections went quite smoothly. We will look at the results and draw our conclusions, of course, look at where adjustments and changes could be possibly made, but overall, I’ll repeat, this was a turning point.

Another issue of concern to you all, I am sure, as municipal deputies, is that law 131 [Federal Law ‘On the General Principles for the Organisation of Local Government in the Russian Federation] came into full effect on January 1. We made the conscious choice, a while ago, to allow for a special transition period. Starting from this year, this transition period has ended in all regions of the country. The only exceptions are two republics in the south, where, due to specific circumstances, municipal government is still in the process of formation. These two republics are the Republic of Chechnya, and Ingushetia, but the process will be complete there by the end of this year. I think therefore, that we should also discuss the lessons learned so far in implementing Law 131. I would like to hear your thoughts on this matter.

Among the other issues we should definitely discuss, I think, is the economic situation in general and the impact the global financial crisis is having. We should talk of course about balancing the revenue base and the powers of local government. This is a complicated issue, but it is one that never goes away. No matter in which region I discuss this question, and no matter what the circumstances, this issue is always relevant. It needs to be said that there were already more than enough problems in this area even before the crisis began.

So, I think that we should take yet another look at the municipalities’ taxation base and sources of revenue. They are clearly insufficient for effectively resolving a large share of local-level problems. In this respect, the question has been raised in the past, and I think it should be looked into further, of dividing assets between individual municipal districts, settlements, and new municipal entities, in order to achieve a fairer distribution of revenue sources.

Of course, work also needs to continue on optimizing the powers of individual local government bodies.

Another issue, political in nature, but with obvious practical consequences, is that, in accordance with the initiatives I put forward in the Presidential Address [to the Federal Assembly], we have passed a number of new laws. One of these laws regards the basis on which the Federation Council is formed. As you know, once the transition period is over, only those who have been elected to municipal or regional assemblies will be able to enter the Federation Council. I think this is a good thing because it will make these people’s work more public. Before entering the country’s highest legislative body, the upper house of parliament, representing the regions, they will first have to go through the crucible of local elections, which will give them solid political experience. This is true even of those who have gone through this experience at the lowest levels of municipal government, because it is nonetheless a very different thing to simply representing the interests of this or that senior official.

Another initiative is to increase local government assemblies’ supervisory powers with regard to municipalities and their heads. In accordance with this presidential initiative, which has already been introduced to the State Duma, deputies will gain the right to remove from office the heads of municipalities. Deputies will be able to set this procedure in motion on their own initiative, or the initiative can come from the top official in the region, that is to say, the region’s governor. This will give the local government assemblies considerable influence, and I hope that the deputies will use it responsibly, carefully, and for the common good, not in order to settle scores, but in order to build a government system that works smoothly and effectively. This is an important power, and I say again that we are going to have to keep careful watch on what happens in the country, because we have a great number of municipalities, and every one of them has its own particular conflicts and problems, this is a normal situation. On the one hand, we need to give the municipalities this power, but on the other hand, we need to ensure that it does not become a pretext for endless settling of scores.

Like all other senior officials, municipal heads also have greater responsibilities to bear during the crisis situation. Today, we need to get the most effective specialists into these positions. It is not important what background they come from. What matters is that they need to be people who can really carry out social commitments, preserve jobs, and support small business.

Colleagues, you have the best knowledge of your local situation. You know all of our troubles and problems, and you know the advantages that this or that municipality has, perhaps. I would like to hear what you have to say about all of this.

Let’s look too at any issues that can be settled quickly. We could take the necessary decisions. Aside from congratulating you once more on your new offices, this is also the purpose of today’s meeting.

So, let’s begin our discussion. I know that some of you have prepared for it, but this does not mean that the others can relax, sit back and drink tea.

***

There are many factors that influence the world financial situation. Since we have started talking about global issues, I can say that in April, I will be going to London, for a meeting with the heads of state of the world’s largest nations, in order to work out a package of measures to counteract the crisis.

For now, the situation is very unclear. I must honestly admit that we are continuing to fall, and when I say “we,” I mean the world economy overall and the Russian economy as a part of the world economy. For the moment, we do not know how long this will continue, but it is clear that we must prepare for more complicated times, yet at the same time, assume that this crisis should help us to resolve some of the most difficult problems that we were facing before, which we inherited, so to speak.

At the same time, there are multidirectional trends that testify to the fact that the world economy is moving not only downward, but that in addition, there are other processes taking place, ones that are not yet very easily defined. Still, it is enough for some bank or another to show more or less decent results, as was the case for Citibank yesterday, and today, stock markets in the entire world opened positively. This seems like something so abstract, that somewhere far away in America, some bank has grown, but as strange as it may seem, this fact nevertheless has a direct influence on our well-being. Because if this is a symptom of incipient stability, which is something we would like to believe, then that is very good, whereas if these are random incidents, then the crisis trends will continue. But in any case, we must monitor these trends, and use them as a basis for making prognoses.

You know that we have put together a very difficult budget that, for the first time, had a deficit. From a three-year planning cycle, we have reverted to a one-year cycle, because we cannot plan that far ahead in these very complicated circumstances. But it is good that we prepared for the crisis.

You recalled 1998; I also have my own memories of that year. I was doing other things then. I must admit that the situation then was significantly more dramatic in every way, despite the fact that it affected only Russia and was less deep in nature. It was more dramatic because of what was happening to prices, to people’s incomes, and in terms of suspensions [of production], non-payment, etc. Today, the situation is very different, and we must keep it that way.

I feel that certainly, the government must act more rapidly in these circumstances to put through orders, municipal purchases, and military orders, because that is already the government’s basic responsibility, and in a crisis, decisions on contracting and allocating money must be made as quickly as possible.

The governor and I spoke about the fact that, for example, many large defence manufacturers have still not received government orders. And that is very bad, because we have the money for those orders; that money is fixed directly in the budget. But because we have a very difficult, inert bureaucratic system, months will pass between the moment when a decision is made and the time when the money is transferred through the budget to a specific company. So what does the company do? The company is obligated to take out a loan. The loan is taken out at the rates that we have just discussed, under highly unfavourable conditions.

This is then reflected in people’s societal well-being, in the incomes of the workforce, and in the income of the company itself. So this vicious cycle must now be torn down, or at the very least, minimised.

I can assure you that we are giving very careful attention to the topic of government contracts in the context of crisis management, because that is the very resource that is capable of supporting manufacturers to at least some extent, whether the manufacturer is big, medium, or small. This is something that we will unfailingly address.