Seeking Kremlin return, Putin pledges spending

Reuters News
Posted: Feb 13, 2012 9:24 AM
Seeking Kremlin return, Putin pledges spending

By Alissa de Carbonnel

MOSCOW (Reuters) - Russian Prime Minister Vladimir Putin set out plans to increase spending on healthcare, education and social services Monday, trying to woo protesting middle-class voters before a presidential election he is expected to win.

Putin acknowledged in a front-page article in the popular daily Komsomolskaya Pravda that Russia lacked affordable housing and efficient social services - concerns voiced by the urban middle class that has led street protests against his rule.

Regretting that one in eight Russians lives beneath the poverty line - a little over $200 a month - he promised to address the gap between rich and poor, boost teachers' wages, and to take steps to increase Russia's population after years of decline by bolstering child benefits.

Some economists and political analysts described such pledges as populist and said raising government spending could be problematic at a time of economic uncertainty.

"Just 10-12 years ago, the debate was mainly about keeping a whole social category, first and foremost pensioners, from slipping below the poverty line," Putin wrote in an article entitled "Building Equality: A Social Policy for Russia."

He said perceptions of what constituted an adequate standard of living had changed and added: "The population, and most of all the 'middle class', educated, well-paid people, are overall dissatisfied with the quality of social services."

The article was the latest in a series in which Putin, 59, has laid out his policy plans before the election.

Opinion polls suggest he will be re-elected comfortably to the post he held for eight years until 2008, when he stepped aside because the constitution prevented a third successive term. He became premier but remained Russia's dominant leader in a "tandem" with President Dmitry Medvedev, whom he nominated.

However, the former KGB spy is facing the biggest protests of his 12-year rule and it is not certain that he will avoid having to contest a second-round run-off by winning more than 50 percent of votes in the first round.

Monday's article was the latest sign that although Putin has rejected the protesters' main demands - notably for more political choice - he and his inner circle are looking for ways to address the growing disenchantment.


Putin pledged hefty pay increases for key public sector employees, including university and college teachers, doctors and researchers, while also raising handouts to large families and students and acting to reduce the cost of housing.

He called for a "workers' aristocracy," proposing a set of measures to give workers a bigger role in management, more professional training and a better chance of career improvement.

Putin said that meeting his goals of wage increases for medical personnel, researchers and teachers would require "significant resources" and put the price tag at 1.5 percent of gross domestic product (GDP). That would mean about $30 billion.

Although he said state pension payments account for 10 percent of GDP, he had decided against raising the pension ages of 60 for men and 55 for women, a move that could ease the drain on state coffers.

Deutsche Bank economist Yaroslav Lissovolik said: "In view of the current debt burden, Russian can allow itself some increases in the upcoming years.

"The problem is that structurally the budget is already running a deficit ... It is quite high as a result of the significant increase in social spending."

Evsey Gurvich, head of the Economic Expert Group, which advises the finance ministry, said Putin's article left out any discussion of unpopular measures, such as tax increases, that the government might need to meet its ambitious goals, "if we don't want to be a bankrupt country like Greece."

But Dmitry Oreshkin, a political analyst, said many Russians would treat the spending pledges with skepticism.

"This article is a clear example of populism, which does not appear to be very efficient today, because Putin has largely lost his credibility among the Russian people," he said.

Russians have in general become wealthier since the market reforms that followed the Soviet Union's collapse in 1991 and the economy boomed while Putin was president before, mainly on the back of a surge in the price of oil, Russia's main export.

But members of Russia's emerging middle class in cities like Moscow and St Petersburg are alarmed by corruption, the wealth gap and the tightly controlled political system dominated by one man who could win two more six-year terms as president. ($1 = 30.0600 Russian roubles)

(Reporting by Alissa de Carbonnel; Additional reporting Alexei Anishchuk, Maya Dyakina and Jason Bush; Editing by Timothy Heritage and Alastair Macdonald)