08/13/1998 23:06:54 FOCUS-Yeltsin under pressure to end market crisis
By Oleg Shchedrov
MOSCOW, Aug 14 (Reuters) - A holidaying President Boris
Yeltsin visits the ancient city of Novgorod on Friday under
increasing pressure to restore the nerve of Russia's financial
markets after one of their blackest days in their short history.
Shares ended 6.5 percent down at levels not seen for two
years after initially falling up to 15 percent.
Moody's Investors Service cut the credit ratings of several
banks, Standard and Poor's reviewed the government's debt rating
and short-dated treasury bill yields soared as high as 210
percent as markets lost faith that a rouble devaluation could be
Yeltsin called Prime Minister Sergei Kiriyenko to tell him
to stick to an austerity programme which has so far failed to
But Washington, fearing political instability in the world's
second nuclear power, put pressure on Moscow in unusually stern
language to do more as the crisis hit Wall Street shares.
"It's critical that the Russian government act quickly to
restore confidence in their economy, and that is something that
we have communicated directly with Russian officials," White
House spokesman Mike McCurry told a news briefing.
"The international community has a big stake in seeing that
Russia gets their economy moving in the right direction."
Asked if there was talk of unilateral action before
President Bill Clinton's Moscow summit next month, he said:
"Clearly...there's some work going on on that."
He confirmed that officials from the Group of Seven
industrialised countries had discussed Russia on Thursday and
said Treasury leaders were in touch with Moscow.
But McCurry declined to be drawn on whether additional cash
might be made available to Russia, which won a $23 billion
rescue deal from the International Monetary Fund last month, or
to comment on whether the rouble would have to be devalued.
Markets were shaken by a letter to the Financial Times from
international financier George Soros who called for the rouble
to be devalued and then pegged to the dollar.
"The meltdown in Russian financial markets has reached the
terminal phase," he wrote in what he said was a "wake-up call"
to industrialised nations about Russia's urgent need for help.
"This is Black Thursday for the Russian financial markets,"
ORT state-owned television said.
Kremlin officials said that even from holiday, Yeltsin, who
has been away since July 20 and is due back at his desk later
this month, was in control of all major developments.
Kiriyenko, installed by Yeltsin in March to take reforms in
hand, pledged to stick to his austerity programme and said he
saw no financial reason for the latest market crisis.
"Unfortunately what's happening on the markets belongs in
the realm of psychology," he told reporters.
The German Finance Ministry in Bonn said a restoration of
confidence depended on Kiriyenko keeping his word to raise
revenues and cut costs.
Kiriyenko said the IMF bail-out would allow his government
to meet its obligations this month and next.
The central bank on Thursday restricted some commercial
banks' access to hard currency to help steady the rouble and
extended new credit facilities to some banks to try to prevent
any payment default that could undermine the banking system.
A senior bank official said devaluation was not practical.
"A one-off devaluation of 15 to 25 percent would not solve a
single one of the problems facing the Russian government,"
central bank deputy chairman Denis Kiselyov told Reuters.
Yeltsin, for his part, will spend five hours on Friday in
Novgorod, 350 km (220 miles) northwest of Moscow and near his
current lakeland holiday retreat, talking to city officials and
visiting industrial and agricultural enterprises.
He has interrupted his holiday only once to return briefly
to Moscow to make preparations for what he said would be a "hot
Interfax news agency quoted local officials as saying
Yeltsin would announce the restoration of the city's old name,
Great Novgorod, dropped under communist rule.