unfinished business a year on the revolution that youth activists spearheaded appears to have stalled the military rulers who replaced with. hello again the welcome to spotlight the interview show on our team i and our nadia and today my guest on the show is unders. the world economic forum is kicking off and dr during the next few days leading businessmen economists and politicians will be discussing the world's economy is the most pressing issue as the issues are quite a few specially after nine years those countries pride their credit rating cuts earlier this month so what should we expect to happen to the world economy and the neoprene david the forum in davos will be helpful so we're asking one of europe's

most prominent economists former advisor to the russian government anders often. on january thirteenth standard and poor's downgraded nine european countries including the stronger ones like france and austria both received a negative outlook considering the european leaders inability to cope with the debt crisis the weaker spain and italy were downgraded to an economist say they are one step closer to the greeks an aureole being part of europe russia has to come up against the global challenges but as for now it's managed to cope and recon in me is still growing. oh mr austin they're walking to the show thank you very much for coming my pleasure well on the eve of this year's davus i want to comment form the organizers warned that. i quote the world is facing significant and urgent challenges that we have

only on prospects for future growth and the cohesion of societies and quote while it struck me that exactly the same words we used last year during the forum well it is just a repetition of the same very good phrase but does that mean that the world politician the world policymakers proved and they will during the year to do anything to tackle the crisis except ride war it's. a pretty accurate analysis it is this if it were european politicians have not done the work you should have done and we are now coming to an end game of a euro crisis. where is the solution or big euro zone breakdown personally i think that there will be a solution to the euro crisis and the human next quarter also we will see both of

your economies bottoming out and that the solution is fine so what would have a solution be. more money is needed to provide confidence and personally i believe the fiscal adjustments that are undertaking are pretty much of a right once the banking situation is probably becoming somewhat more stable now that we have seen substantial the leveraging and then we have a greek default that has to be completed so these are the big issues that i think will dominate but discussions in doubles this year you sound pretty optimistic speaking about the solution that you thiel or you trust will be found during the next couple of months the the forum's global issues group as he calls it calls on the world leaders to deliver concrete actions to find the solution and what what are these actions that could prevent the. wave of the new wave of recession or well

i think that we are seeing a recession in europe already and probably we are seeing a decline in their g.d.p. or one percent or so in the european union this year but that's not a catastrophe a catastrophe if we get a real financial meltdown and it. really needs to be done now it is the if the i.m.f. can mobilize the more money it's trying now to get five to six hundred billion dollars or more funding and i think that is a critical issue and indeed that of a greek default is properly handled so that it's a sorted out to be subject to big issues that need to be resolved and the european politicians simply need to undertake proper. decisions about they don't get the stack off way and are losing credibility have

a more all the time the unifying theme the unifying motto of this year's dallas forum is the great transformation above this this is the sort of the the subject that all the gathering around well what kind of a transformation is the world economy facing in your opinion well of course there are several transformations here one is about the bric countries brazil russia india and china or rising. big emerging markets are now becoming as large a part of the world economy as to. the developed economies and it's also a question of the particularly in europe that we are seeing substantial reform of the public sector. that the labor markets are being deregulated public administration is becoming more efficient and finally education and health care or being reformed and we're seeing the reforms very much moving. from the north and

east of the european union towards the sound that is the big problem while answering the question of transformation you mention the brics countries where only actually today when the when the with advanced economies are facing sluggish economic growth does it mean that we are facing or we are we are ready to to witness a transformation a shift of economic power from the east to the west or rather maybe from the the west to the. in newly emerging economies to the brics we have seen very very strongly for the last decade and the question is rather for how long it will continue and i think that you are seen to use coming up the one is that europe finally is reforming itself and increasing productivity and dealing with problems better should have been handled much or. more optimistic on

europe than most people are and the other is than the. number of countries emerging economies or approaching the middle income. trap as it's called and if we discuss russia concretely russia has had wonderful growth for seven percent a year. for ten years until two thousand and eight and then a much lower growth rates an r.v. expect asians are three to four percent that's a grove instead and the question is if russia and other countries that are reaching this meet the income level if they manage to reform further and reach a growth freight of five to six percent i should be possible here or if they will stay at a three to four percent growth rate you know i've talked to my. crystal

a banker who just a couple weeks ago before the new year and she said that you'd rather. keep your money in euros rather than in the u.s. dollars that's why she said so look at all those troubles she said it's a good sign when europe was saying hey we're winning we're all together i knew you knew when we were really to be the united states well it was so so but now when europe starts talking about severe economic problems admitting those problems and trying to solve these problems which are actually problems of growth this is a better sign than saying everything's fine do believe so it's extremely difficult to predict the exchange rates in the short term but if we discuss it in broader terms you can say about europe has an immediate crisis of them which is acute it has lived in europe is a step in the right direction as. i thought was same in russia in the summer of ninety eight but russia had problems that had to be resolved and instead we saw

a default which i don't think was necessary but. the united states has more long term fiscal problems and therefore us is not likely to have a crisis any time so the. fiscal situation that is long term sustainable nine european countries including france which was a rated u.s. had their ratings downgrade how does this affect the situation on the european market situation with the euro because of it it has to do with ace one is that it's a wake up call to beas countries where. they should not be. relaxed particular for france. in austria but has a aaa rating and lost it and began. if it is banned. financial. stability facility lost.

its standing. the situation in europe becomes moot difficult from a financial point of view two handed down all s. and p. another reaching rating agencies they are often blamed for and for for organizing for the the global economic and economic meltdown for and for actually being the drivers of problems in world economy there's this reputation that they're losing doesn't still mean they still have a say in the world economic issues will they will they be listened to in dallas by the world leaders will certainly have a big role because they are mainly institutions insurance companies and pension funds which are allowed to have. assets of the sort. rate and therefore if borne loss' is

a aaa rating it means that it looses a certain part of of the market imperial really. the rating agencies or tend to be behind that they are acting too late and if you take the more securities better i gave aaa or rating. the problem was about they thought. this mortgage securities mortgage basic you're it is we're better than they were so when the rating agencies are downgrading we should rather see better means where it's a really bad if even the rating agencies say that this is a difficult situation what's your opinion of the efforts of the european authorities to create their own rating bodies is there is it just means that they're angry on the rating agencies or is it

a step in the right direction. the problem is wrong but at a bare only three big rating agencies in the words of advice to little competition among them and it's also a problem hall beyond being finance the best being financed by the parties that the you know all being raked. to have a state board to doing the. raking would. introduce in addition and by is when we want to get rid of the biases ok thank you and we will say goodbye just for a couple minutes just to remind you that we talking to andrew's learned one of the europe's most prominent economist and once an advisor to the russian government spotlight will be back in a matter of minutes after we take a short break so don't go do.

you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realized everything you thought you knew. i'm sorry welcome to the big picture.

welcome back to spotlight on arguer nabhan just a reminder that my guest on the show today is mr austin and one of europe's most prominent economists and former advisor to the russian government mr austin and most of the countries today are starting to implement severe austerity measures to tackle their debt problems would you say that this is the best the politicians can do or you would expect something something more imaginative. where you can't demand

money really beyond the very limited means to be as it is today the euro zone has an average public tipped over ninety percent of g.d.p. and. my colleague in washington come and rinehart and harvard professor can draw golf they have. made it in period to study which it can get over ninety percent of g.d.p. in public debt then big growth rate tends to fall by one percent but if you can you have to limit it when you come to that little well i would agree to that but when when the story to measures until taken on such a large scale and are used to tackle such such big problems they mainly penalize they did they would repeat people the people that we see in the streets

next day why are people have to be penalized while the banks are feeling pretty relaxed during the. periods when the governments are trying to tackle the crisis shouldn't bones be paralyzed first of all fight for inadequately fulfilling their role yes they should be. have been working quite a bit with latvia which has operated like that they can. the salaries most of for the people who earned more and the foreign banks take the losses. that's what you ideally should do but what you don't want is about the whole banking system falls apart that's when you have to bail them out but the we have one big example and bet is ireland where the government early on guaranteed all bank and bet was wrong so so so so the governments today have to balance

i mean i mean they have to take into account the security of their own banking system and keeping it stable and on the other hand they try to see the situation the streets what's happening with the people of the protestant and then also shows which is the country which are which is why i think those are both what is very important here is very few act fast and hong kong and the baltic countries and stone you latvia lithuania and also iceland acted hard and fast and be have the balance right. in ireland and greece are examples of countries that did the balance wrong and acted. too slowly so you have to think of what you are doing the politicians should take a substantial cost them selves and they should take sufficient measures so bad the countries become financially sustainable are the ones who don't get the credit bill

it doesn't should should be europe's transition to a common economic policy which they talk a lot these days should it lead to a sort of economic federalism undercounted and that's a possibility but the central thing is that each count three is financially responsible and it's a rather funny when the germans who have ignored the stability and growth pact and the master if the criteria for ye of the year. and when they are complaining about don't do them when it was germany france and italy that broke down the stability and growth pact to in two thousand and three and two thousand and five survey of the course is over the counter and to euro crisis is and then they should take responsibility to up on themselves and not try to blame other countries well let's talk about russia russia is only partly part of europe burns kept losing your of

the main main factories and you the government is in europe and the the elite feels itself more your appeal has has more european mentality that any than any other so what does it all mean for russia they the this situation in europe will it will it hit russia pretty pretty hard and what do you think while russia is is a specific place will is good about russia is for macroeconomic policy but russia has a balanced diet hardly any public day and it has a floating exchange rate non-secure do not get into a devaluation crisis again and right now inflation is down to five percent these are the positive a point the dangers are but russia is heavily dependent on the oil price and if there is a serious european crisis is severely prize winning or likelihood for and vetted

structural heart also be other weakness is subject to capital flows last year i said a capital outflow capital flight of eighty four billion dollars so these are the two weaknesses we all prize and capital flows but also in the while you were advising president yeltsin and and you got a guy there who run the economy in this country this is uganda was their opponent the communist leader of russia he is still the main. in opposition leader today and just yesterday he said on national television one of these pre-election debates that the all prices are giving down and the russian economy will collapse pretty soon if he doesn't become president of course well do you believe that. he has a reason to say so for these predictions all this is just rhetoric. some stage we all should be reduced as it is now we all prize for the last year has been

amazingly stayed. the most forecasts it's about if we stay at approximately this level for at least the so it's not likely to really go for russian for countries like russia below below eighty. barrel if it falls below the two eighty or below. it is really maybe critical. today the balance is one hundred seventeen dollars per barrel of course you can have a budget deficit well russia's outlook has also been downgraded from positive to stable does that mean the capital outflow which the russian leadership has been trying to to to tackle for years will be continue in the future it's very difficult to to to predict the capital flows to because we are so many factors that

influence it's more a big risk factor then something that is predictable. politics has also had a very strong influence on russian economy just one of the specifics of russia this year two thousand and twelve is the election year and bush do you think what or what do you think will be the biggest economic problem in russia during this election year. i don't think that there will be big economic problems if. the biggest concern is about corporate governance is poor in russia party because the courts are not sufficiently the pendent and if the courts get more exposed then corporate governance should improve and the very low valuations of russian stocks should should arise i think that there are substantial possibilities for

improvement while the growth rate is generally expected to be somewhere about three poor four percent. very positive in comparison with europe but of course harmful but what russia has been used to before the global financial crisis this is a pretty optimistic assessment from an informed person like you are. well i think what we're seeing now is that more checks and balances will interview stage with regard less of the exact outcome of a political crisis which i shall be careful not to predict well we're living in the world of a shifting economic power from the atlantic to the pacific and this is obvious this may be slower or faster but this is happening do you see a place for russia in this process and what is the place for russia of course russia has one place today is one of the big producers or.

in the world and the place that russia should to get is. one of the big. generators and realizes of human capital in the world so the question is if russia can move from being a raw material producer to becoming a sophisticated. producer and all resources are here. what is really missing is as we hear on the gaidar forum that i'm here for it's all the time problem of business climate and investment climate and corporate governance can be sphynx be improved then russia would have a wonderful future so when the russian leadership is talking about the need urgent need for modernization they're absolutely right is. that we have seen this discussion now for since the two thousand and seven two thousand and eight and so

far we have seen very few measures so everybody is waiting for permission to be undertaken so the question is as somebody said that this conference is north dra the war to do about how to get it done thank you thank you very much for being with us and just to remind you that my guest on the show was anders one of europe's most prominent economists and once an advisor to the russian government and that's it for now from all of us here if you want to have yourselves part like their job they'll be back with more force don't comment on what's going on in and outside russia until then stay on target and please take.

more news today. these are the images the world has been seeing from the streets of kandahar. trying to corporations rule the day. loyalists out of the way leader moammar gadhafi of the authority in the town of bani walid saying that the administration of the is now in their hands this comes just a day after a bloody battle between transitional council forces and local militias and at least five lives. damascus greenlights an extension to the arab league mission in syria this comes as six gulf states withdraw their support questioning the regime's commitment to the peace plan meanwhile the e.u. has extended its economic and travels as well as targeting twenty two individuals connected to the government. that will do nicely reports emerged that iran is

accepting gold this payment for its oil exports effectively bypassing the latest round of sanctions imposed by the u.s. and europe china could be the next country to follow in india's footsteps. now joined. his guests to discuss the situation in egypt a year after the revolution cross-talk is up next. you know how sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize everything you thought you knew you don't know i'm tom harpur welcome to the big picture.