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. Last Updated: 07/27/2016

Premier Battles To Limit Spending




Prime Minister Sergei Kiriyenko, facing a budget crisis and an uproar in the parliament Friday over the government's failure to pay coal miners, fired back with a proposal to pay the overdue wages at the parliament's own expense.


He proposed finding the money for the miners by slashing the budget for parliament and government administration by 25 percent, and the State Duma approved the idea 371-2 on first reading.


Kiriyenko threw down the gauntlet to communist deputies, telling them that they could not appropriate more money for miners without finding cuts -- such as their own perks -- somewhere else.


"To quickly solve this problem, we need additional money, and let us find it," said Kiriyenko, who made an unscheduled appearance in the Duma, the lower house of parliament. "Let me use this podium to state officially that we cannot appropriate new money in connection with strikes and protests."


The measure would free 500 million rubles ($83 million) for the miners, who are owed some 3.7 billion rubles. Kiriyenko said the government is looking at other measures to address the problem.


An additional 47 million rubles have been found for vacations for miners' children by having state-owned railways take them to summer camp for free, he said.


It was a swift, populist response to the rebellion staged by opposition communists in the Duma, who halted the morning session with an impromptu protest over the situation in the coal industry. Miners in the largely state-owned coal sector are staging hunger strikes, blocking railroads and taking officials hostage, demanding to be paid back wages.


To become law, Kiriyenko's proposal must pass on second and third readings and then be approved by the Federation Council and President Boris Yeltsin. The deputies are to take up the measure again Wednesday.


The Communists, making their oft-repeated threat to impeach Yeltsin, demanded that Kiriyenko appear and account for the government's failure to pay the miners. The arrival of Fuel and Energy Minister Sergei Generalov and his deputy, Alexander Yevtushenko, did not satisfy them.


Kiriyenko then agreed to come, but only if the Duma agreed to take up his idea.


Usually, the prime minister is entitled to five days' notice before answering a summons from the Duma.Bidding to outdo Kiriyenko, some deputies suggested making the cuts 50 percent, but they settled for the smaller amount.


The prime minister's proposal is only a hint of things to come, with the government planning further austerity measures to prop up its tottering finances.


Kiriyenko, who took office three weeks ago, is struggling to fix the chronic and politically embarrassing problem of wage arrears at a time when the government's finances are strained by poor tax collection and rising borrowing costs.


The prime minister has said that 26 percent of budgeted spending is not backed by revenues, necessitating across-the-board cuts. The government has said it will slash 200,000 public-sector jobs in cuts earlier agreed on as part of Russia's loan package from the International Monetary Fund.


Just as ominous are rising interest rates, which increase the government's borrowing costs and consume money that could otherwise be spent on wages and social services. Interest rates on government debt have risen to around 40 percent from 20 percent a few months ago, as investors have reassessed the risks of lending in emerging markets.


Russian financial markets, having weathered the Asian financial crisis in October, now face fallout from the turmoil in Indonesia, and many investors fear the economy might not withstand another exodus of jittery foreign investors.


Low oil prices have battered the oil companies that dominate the Russian stock market, and in turn hit the federal budget, which depends heavily on oil taxes. The Moscow Times Index of 50 leading shares fell 16.2 percent during the week.


Thousands of coal miners have gone on strike in the past week, saying they are owed up to six months' back-wages. Some are staging hunger strikes.


Miners were blocking the Trans-Siberian Railway near the town of Anzhero-Sudzhensk, and were blocking another railway near Inta in the Far North. Other miners in the Arctic town of Vorkuta took company managers captive in their offices.


The government holds large stakes in mining companies and subsidizes the unprofitable industry, the production costs of which outstrip prices.