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President of Russia Dmitry Medvedev: Good afternoon dear colleagues,

Today we are meeting for a different reason than normally. First of all, I am glad that young United Russia deputies are at this meeting.

Despite the fact that the work in parliament (unless we count the possibility of an extraordinary session) and other regional and local legislatures is almost finished, I would nevertheless like to talk to you about how your work is going, the legislative initiatives I have put forward, and those which have been supported, adopted and now are, so to speak, a fact of life. For this I would like to thank the United Russia party and all present here.

United Russia has become the force which strongly supported changes in our political system. Of course these are not some kind of preternatural changes, but in my view they are nevertheless important.

As you will recall, the work we've already done has lowered the barrier for parties to enter the State Duma in certain situations. In addition, parties that win regional elections will have the right to propose a candidate for regional governor to the President. This is a very essential innovation that is about to go into effect. Soon it will be time to begin consultations on this subject. We’ll see how this mechanism functions. I hope that it will be able to create clearer political conditions and of course help ensure that we come up with the best choice for the head of a given region.

Important mechanisms related to controlling the authorities have been established, in particular a mechanism for discharging heads of local governments. We haven't used this mechanism yet, but obviously it will be employed at one point or another because there is a reason for this sort of monitoring mechanism, and in some cases it represents the only solution.

We have relaxed requirements on the minimum membership for party organisations. We have initiated certain measures related to media access. In my opinion this on the whole represents a good package. Once again I would like to thank everyone that has been involved in this concerted effort.

We have dealt with other things as well. Yesterday there was a meeting of the Commission for Modernisation and Technological Development of Russia's Economy. We talked about nuclear industry sector and supercomputers development.

Russia has a great deal of experience in these areas. In the field of atomic energy we are perhaps up there among the leaders. Nevertheless, if we do not build on this advantage, if we do not invest money and intellectual resources in this area, we will quickly lose our lead.

So the conversation yesterday was useful. If it's all right with you, I suggest that we discuss the priority areas that I highlighted as essential for the development of our nation and our economy in the years to come.

United Russia has a lot of experience working with young people. Let me say again how pleased I am that our meeting is taking place in this format. As a matter of fact I suggested this because I have been meeting with all the parties. Of course I met with United Russia first because it is our leading political force. But this is my first meeting with its youth wing so I hope that you will feel free to say whatever is on your mind, despite the fact that your seniors present here fix you with their intimidating eyes. I hope that this will not affect the quality of debate.

That's all. Dear friends, I hope that we will be able to touch base and have a good discussion.

* * *

Demography, new birth — this is the most important, the crucial practical dimension of any programme because, ultimately, why are we engaged in these issues? Simply because we want more people who live in Russia to be normal and happy human beings.

* * *

With regard to loans, the issue is very difficult. Yesterday the Cabinet had its latest meeting on this issue. What is happening? You see that recently the Central Bank has already lowered the refinancing rate three times and it returned to the indicators we had in the pre-crisis period. But prior to the crisis loans were given at 12–14 percent and now bear interest of 18–20 percent, and this is in the best case scenario. And if we talk about outstanding large companies, those you mentioned, this figure could be 25 percent plus the collateral you talked about — one and a half times the amount of the loan – plus kickbacks. That is the price of a loan. Such loans do not exist, simply no one would want to take them out. This is a consequence of systemic problems in our economy, on the one hand, and the effect of large generalised problems in international finance, on the other.

Because unfortunately the trust that started to build in our financial system over the past, say, three to five years, was destroyed by the crisis. Therefore, even if the Central Bank sets such a low refinancing rate for banks, commercial banks maintain a very big margin to cover their risks by increasing lending rates, in addition to what you were mentioning. I will not say anything about illegal charges – that is a separate issue.

What should we do about this? It is clear that neither executive orders nor orders will help. We have to try and change the overall economic climate, restore confidence in our financial system. As soon as it is restored (I hope this will happen if not this year then next), of course interest rates should also return to normal.

But our task is even more ambitious. If you look at all countries who have been affected by the global financial crisis, almost none have inflation – they mostly have deflation; only in our country is there huge inflation. And in this respect it is impossible to argue with our Minister of Finance with whom almost everyone is always arguing, since it is true that with this inflation it is very difficult to extend normal loans. For that reason we must consistently work at decreasing inflation.

Inflation has slowed in light of the decrease in the total production in the country.

Maybe this year it will be even less than expected, not 13 percent but rather somewhere around 10–11 percent, we shall see. But it is still very, very high. We need to push inflation back down to around 4–6 percent. Only in this case will our domestic financial system be effective because there is no developed country where lending rates are at 15 or 20 percent even during a crisis. Especially during a crisis they make other kinds of decisions.

So this task is extremely important and naturally macroeconomic in nature; it does not depend on the decisions of the federal government and local authorities, but rather is a shared and complex problem. Nevertheless, we must absolutely deal with it.

* * *

If we return to how our national projects were carried out then what happened? We initially did not know whether people in rural areas would take out loans, then it turned out that they would and with great pleasure. They took out a variety of them, ranging from large sums in leasing schemes for the purchase of cattle and agricultural machinery in the order of tens of millions of rubles, to credits of 200 thousand, 300 thousand rubles, when our ordinary citizens took out credit to purchase individual animals. But surprisingly they did this without fear and while expecting quite a normal economic performance. I have already talked about this event but I can still remember it perfectly. I remember it was in [the Republic of] Mordovia and there was one grandmother who struck me in particular as she talked about how she would spend her loan (it was quite small, as I remember 250 thousand rubles) and with such calculations that I was simply astonished. After this my mood noticeably improved and I realised that our rural areas can be revamped quickly because such a person who has never engaged in economic activity – I think she took out a loan for the first time in her life – nonetheless prepared herself, took out a loan, and then got some new cows. It was a very good example.

Now the main thing is to ensure that the crisis which hit us does not scupper the investments we made in rural areas because these regions were in a very bad state, and we have helped them make some steps forward. Quite a number of facilities in a number of regions have been established, and this means that large amounts of credit started to flow and houses began to be built. Now the main thing is not to ruin this for a few difficult years.

But I think we can overcome these problems because funding is still available. The main thing is to maintain the schemes that were developed following our work in these areas. What do I mean? I am thinking of subsidies for the credit rate. It might be difficult, but in any event we will maintain the subsidy according to which the government covers 95 or 100 percent of the credit rate on a loan for the purchase of livestock, equipment, or agricultural implements. These preferential schemes must be maintained. Because agriculture is a special sphere of life and it does not survive anywhere without subsidies – it simply cannot. We have to understand this. And the forms of government support that exist, say, in the European Union, are in an entirely other league compared to our measures.

We are currently involved in a multi-year accession process to the WTO and during this difficult process they always say to us: “how about you decrease your support to agriculture.” But if we talk seriously about how much we support our agricultural sector, it is significantly less than the amount in individual EU states. Of course, agriculture must also be a business and a profitable one, but the government does have to take a position here. Why do I say this? Because if there is such a business then there will also be jobs, normal homes, apartments, clubs, and so on.

* * *

You talked about the whole range of problems facing youth in the Caucasus, and not just young people. Of course the main problem is unemployment, the lack of good jobs. This was so before the crisis and now naturally it has only increased and everything we do should be aimed at creating new jobs. You should have no doubt that federal government policies will always seek to create the largest possible number of jobs – we all need this. But of course it must be a two-way street.

You said that youth want to work in the North Caucasus and I cannot argue with this. In fact, you have very good people who can work — it's true, very hardworking people. And the most important thing is to have normal, reasonable conditions in which their work has effect, so that there is no danger that they fall in with extremists. In such conditions everything will more or less develop.

As for individual federal target programmes, you know that we have adopted a certain number recently. Some of them are working and others are working less well. For example, we are preparing a special programme for Ingushetia and I think that we will adopt it simply based on what the current situation is. As you know yourselves, things are more difficult there than in some other republics. Unemployment is higher, not to mention the serious problems with terrorism, and we are going to work on this for a little longer yet. But such a programme will be adopted.

I am very glad that the President of Ingushetia worked on this and is working on it (he is now recovering as you know, I visited him just recently), and the Acting President as well. Because you cannot weaken and show the bandits that their actions have resulted in paralysing the work of the authorities, that they do not make decisions anymore. This cannot be the case anywhere. If power becomes weak it is not power anymore, and this is all the more true in the Caucasus. You know how people relate to authority which does not show its powers – people wipe their feet on that power. This is unacceptable because it can lead to collapse.