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. Last Updated: 07/27/2016

Finance Ministry Urges 'Fiscal Consolidation' by U.S., Europe

Vedomosti Pankin
LONDON — The United States and Europe must take "serious steps" on fiscal consolidation to ensure that the world economy returns to strong growth, Deputy Finance Minister Dmitry Pankin said Thursday, staking out Moscow's position ahead of a G20 summit.

The weekend meeting of the Group of 20 leading economies is expected to pit European calls for fiscal austerity against U.S. warnings that spending curbs threaten an already fragile recovery of global demand.

"We think without fiscal consolidation it will not be possible to have strong economic growth," Pankin said at a Euromoney investment conference in London.

"Our position is that countries should take serious steps in fiscal consolidation, especially Europe and the U.S."

In a letter released before this week's G20 summit, U.S. President Barack Obama said public finance problems should be addressed in the medium term — effectively warning that fiscal discipline should not be carried out at the expense of economic recovery.

Faced with a euro-zone debt crisis, however, several European nations, including Germany, are focused on cutting ballooning deficits.

Despite higher state spending, Russia is aiming for a lower budget deficit this year on the back of higher oil prices, targeting a shortfall of 5.4 percent of gross domestic product instead of an originally planned 6.8 percent.

Pankin also said the recent volatility of the euro would not prompt Russia to change the composition of its foreign-currency reserves, saying the country had benefited somewhat from the currency's recent weakness.

"All this turbulence doesn't mean that when the euro goes down we need to diminish reserves in euros. We take a long-term approach in reserves," he said.

The euro has fallen by about 14 percent against the dollar this year. Shifts in major central banks' policy on how they divide up their hard currency reserves are one factor watched closely by the market, and Russia has among the world's largest, swollen by oil dollars over the past decade.

Pankin also said a weaker euro wasn't entirely negative for Russia.

"There are some advantages for Russia as our major exports, oil and gas, are in dollars and major imports are in euros. So there are some advantages in terms of trade. But the instability means less flows for investors."