By Chrystia Freeland and Douglas Busvine
ST PETERSBURG, Russia (Reuters) - Political protest is the "new norm" in Russia and the government has to have a dialogue with the rising middle class, First Deputy Prime Minister Igor Shuvalov said on Friday.
Tens of thousands of Russians took to the streets to protest against alleged ballot fraud after a parliamentary election last December and rallies had continued, although less frequently, since Vladimir Putin's presidential election victory in March.
The end of the election cycle does not mean that increasingly affluent urban Russians will lose their appetite for change and the new government will need to respond to their demands, Shuvalov told Reuters in an interview.
"We are passing the way of all developed countries and we need to learn how to live with a situation where the middle class is active and wants to be loud if they don't like something," Shuvalov, 45, said during an international economic forum in Putin's home city, St Petersburg.
"It's the new norm for us ... It's a major risk for us if we try to avoid that kind of protest. We need to learn how to live with this, and what we should do to meet people's needs."
Shuvalov kept his job as the government's number two in May when Putin swapped roles with his protege Dmitry Medvedev, who became prime minister last month.
With the political transition complete, Putin has moved to contain political protest with new legislation allowing for a sharp increase in fines for protesters who violate public order.
Security forces also searched the homes of opposition leaders, including blogger and lawyer Alexei Navalny, and called them in for questioning before the most recent anti-Putin rally in Moscow on June 12.
Many of the protesters are from the middle class, who Shuvalov said made up 30 percent of the population. A research centre that works for the government has described the middle class as people whose income is enough to buy housing using a mortgage, or at least 25,000 roubles ($750 dollars) a month.
Shuvalov, echoing a speech by Putin to foreign investors on Thursday, made clear that calls for change in Russia should not pose a threat to the country's stability.
"We are changing our political system," Shuvalov said. "The president was very clear - this is very good, this is normal. But whatever we are doing, we should do within the law."
Shuvalov, the government's point man for economic policy and privatization, said the Russian economy was in good shape - highlighting annual inflation at a post-Soviet-era low of around 4 percent and solid growth.
But Russia remains overly dependent on the price of oil and other commodities, he added, warning that Europe's sovereign debt crisis could trigger a worse slump than the 2008 financial crash. Russia's economy shrank by 8 percent the following year.
He said the government would prepare a "Plan B" budget that foresees a slide in oil prices to $60 per barrel - from below $90 now. This year's budget is based on an oil price forecast of $115 per barrel.
If such a slide happened, the government would draw on its fiscal reserves to finance current spending this year, but would next year be "very frugal, tight and responsible".
"We understand that, with all the instability in Europe and questions about fiscal union, and Greece, Italy, Spain and Ireland, it can touch us in one day," he said.
"We are part of the global market. We need to be prepared."
Shuvalov said that he did not expect the euro zone to break up, but that the region's banking crisis would act as a drag on the economy. Large emerging markets such as China and India are, meanwhile, slowing in contrast to the strong growth they showed through the 2008-09 slump.
"You can imagine what happens if, at the same time, in Asia growth slows down and in Europe there will be something awful," he said. "If it happens, Russia will be in between, and we will all be in a very difficult position."
(Writing by Douglas Busvine, Editing by Timothy Heritage and Jon Boyle)