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Russia: Government Must Restore Confidence, Experts Say

Washington, 27 August 1998 (RFE/RL) --International Monetary Fund (IMF) officials remained closed-lipped about the meeting Managing Director Michel Camdessus held with Russian Prime Minister-Designate Viktor Chernomyrdin and Ukrainian President Leonid Kuchma in Crimea Wednesday.

The meeting was called by Camdessus to discuss the Russian financial situation and its impact on its neighbors.

At the same time, finance ministers from the G-7 group of major industrial nations continued their telephone consultations on what, if anything, they can do to help keep Russia from a complete financial collapse.

German and American officials mostly reiterated that there is little the international community can do until Russia is able to restore confidence in its markets and in its ability to function.

"Russia is in a difficult situation," said Deputy White House spokesman Barry Toiv, "nobody said this transition would be easy -- tough moments are to be expected."

There are no shortcuts in restoring market confidence, he said, and the "next steps are up to the Russians."

What's critical now more than ever, added State Department spokesman James Foley, is that Russia get its fiscal house in order and establish policies on the ruble, on government debt and the banking system that will lead Russia back to financial stability.

The White House spokesman said there were no plans currently for any special G-7 meetings on the Russian situation, but in addition to their daily telephone contacts, the finance ministers and their deputies meet frequently throughout the year.

The U.S. Treasury Department declined any comment on precisely what G-7 consultations are underway.

Commentators at European and American stock markets said declines in average prices on Wednesday were partially caused by investors concerns over the deteriorating financial situation in Russia and the fall in the value of the ruble.

Analysts from stock trading companies said the markets were volatile because of the uncertainty of Russia as well as continuing concerns over Asia and now Latin America.

The chief investment strategist for financier George Soros, Stanley Druckenmiller, says that Soros Fund's lost over $2 billion on Russian investments in the past year with the fall of the ruble and the dramatic decline of Russian stock prices.

However, he told the financial television network CNBC that the worst effects of Russia on Europe and the U.S. are mostly past. "Anybody who wanted to sell Russia (investments) has already sold, they've had lots of chances to sell," he said, and the effect Russia is going to have on Europe, which has 1.5 percent of its exports to Russia, is just lower interest rates.

Druckenmiller said Russia will probably face "very, very tough economic times for a long period to come."

Meantime, the western private credit rating agencies continued to dramatically lower their ratings of Russia's debt. Fitch-IBCA in London said it believed there was now a real possibility of a complete default by Moscow and dropped its long-term debt rating for Russia from B-minus to triple C, considered well below an acceptable sovereign debt ranking.