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. Last Updated: 07/27/2016

Yeltsin Says Worst of Financial Crisis Over

As Russian markets maintained a precarious stability Friday, President Boris Yeltsin said that the worst of the country's financial crisis was over.

He warned, however, that Russians would have to learn to pay their taxes if the country wants to avoid a relapse.

Yeltsin, speaking in his weekly radio address to the nation, said Russia was partly responsible for the turmoil that has struck the nation's financial markets in recent weeks.

"We ourselves share part of the blame for our difficulties," he said. "Everyone should at last learn to live according to his means."

Russia has been battling its most severe financial crisis in years as investors flee stock and bond markets in fear of a ruble devaluation. The Central Bank was forced to triple interest rates last week to 150 percent to protect the ruble. Although it managed to slash rates Thursday to 60 percent after signs of stability returned to the markets, the situation remains shaky.

In a bid to calm markets, Russia's top financial and industrial leaders put aside their rivalries Friday and issued a joint statement backing the government's efforts to maintain financial stability.

"The government's decisions are tough but necessary," the statement said. "Economic development is impossible without them."

The group, mostly bankers who financed Yeltsin's re-election in 1996, appealed to foreign investors to remain in the Russian market. "Those who are the first to gain a solid foothold in the Russian market will certainly win," the statement said.

The unusual show of unity by Russia's financial groups, which have been at loggerheads over recent sales of state assets, highlights continued concern over the country's volatile financial markets. A ruble devaluation would hurt Russian banks the most because many have large foreign loan portfolios.

Markets were calm Friday, but yields on government bonds rose slightly, reflecting continued nervousness about the ruble.

Yeltsin, however, said the worst of the crisis was over. "We have managed to defuse the situation considerably," Yeltsin said. "But the main work still lies ahead."

Investors remained unconvinced. The international rating agency Fitch IBCA Friday cut Russia's long-term foreign currency rating to BB, which will increase the government's cost of borrowing on international markets. Russia issued a $1.25 billion Eurobond on Wednesday at a 12 percent annual interest rate.

"Additional external financing is required despite the recent recovery in confidence," the agency said in a statement.

Many investors are still counting on Russia getting emergency financial aid from the International Monetary Fund to bolster the Central Bank's reserves, which now stand at $14.7 billion, down from more than $23 billion before the Asian crisis hit last October.

Top finance officials from the Group of Seven leading industrialized nations are due to meet in Paris next week to discuss ways to head off a financial meltdown in Russia. Yeltsin is scheduled to visit Germany next week, where talks are expected to touch on Russia's financial crisis, but officials continue to play down expectations of more money to stabilize the markets.

Russian officials are trying to persuade markets that the government's new fiscal austerity plan is enough to head off a full-scale financial collapse. The plan calls for drastic spending cuts and a fresh drive to root out tax evasion. Chronically low tax collection has forced the government to rely on expensive borrowing to fund state spending.

Yeltsin said Friday the government would no longer tolerate the widespread tax dodging that has led to a massive backlog of unpaid wages.

"The state lives on the taxpayer's money," he said. "Enough of begging and cajoling. The time has come to make demands and to punish, including filing criminal charges. Unpaid taxes mean unpaid wages."

His call comes a day after the government's new tax chief, Boris Fyodorov, announced plans to create a data base to track the spending habits and incomes of the country's rich and famous.

"I want to make it clear that this is not a black list," Fyodorov said in an interview in Kommersant Daily. "People with a clear conscience can sleep tight, others should think twice."

Fyodorov said the 1,000-person list would include the presidents and vice presidents of the country's 50 largest banks as well as ministers and celebrities. He added that the list could easily swell to 10,000 within a year.

The government has so far relied on companies for the bulk of tax revenues, but many are suffocating under the weight of unpaid bills.

As part of the government's new tax collection drive, Deputy Prime Minister Viktor Khristenko announced Friday that five oil companies had until July 1 to pay their tax debts or face bankruptcy proceedings.

Economists said the government's tough actions aimed at cutting out non-payments in the economy were the only way to prevent a financial crisis from reoccurring.

"The fundamental causes of this crisis are home-made," said Gunnar Tersman, an economist at the Russian European Center for Economic Policy. "Hopefully this crisis has been useful because it will stimulate the government to think creatively both about cutting expenditures and increasing revenues."