• ACI Russia

08/26/1998 16:19:01 Europe says Russia must go it alone

By Robert Mahoney

BONN, Aug 26 (Reuters) - Major European powers told Russia

on Wednesday it would have to go it alone in salvaging its

battered economy and currency.

"Russia must do it by itself," said German Finance Theo


He said neither the Group of Seven industrialised nations,

the International Monetary Fund nor the European Union could fix

Russia's problems.

French President Jacques Chirac urged Moscow to push through

economic reforms, saying international support would only work

if reforms were implemented decisively by the new government of

acting prime minister Viktor Chernomyrdin.

A Berlin newspaper reported that German and French finance

ministers planned to write to Russia urging "fundamental and

possibly painful" reforms to fight Moscow's currency and debt


The Berliner Tagesspiegel said in an unsourced report to

appear on Thursday that Waigel had spoken by telephone with his

French counterpart Dominique Strauss-Kahn on Monday and agreed

to draft a joint letter.

Details are expected to be finalised by the end of the week,

and the two will probably address the letter to Chernomyrdin,

the paper said.

German finance officials were not immediately available to

comment on the report.

The British Treasury said it was closely monitoring the

Russia crisis and was in contact with other Group of Seven


European sources said the four European members of the G7

--Germany, France, Britain and Italy-- were in close contact but

it was premature to speculate on a joint initiative or letter.

Waigel told reporters in Cologne it was up to the Russian

government and Duma lower house of parliament to take action to

restore confidence in the rouble.

He was speaking as the rouble plunged more than 40 percent

against the German mark and a bewildered Russian central bank

said it could no longer afford to defend its currency.

The German government has ruled out granting any more

international financial aid to Russia, on top of a $22.6 billion

package put together by the IMF last month, until Russia

implements agreed tax and budget reforms.

Germany is Russia's biggest foreign lender and investor.

Russia's sovereign and commercial debt to Germany totals 75.8

billion marks.

The financial crisis led to declines in European shares.

Frankfurt was hardest hit among major European bourses, with the

Xetra-DAX plunging more than three percent in a reflection of

German banks' estimated $30 billion exposure to Russian debt.

Waigel said Germany had good relations with Chernomyrdin,

who was unexpectedly re-appointed by President Boris Yeltsin

last weekend.

"We will make use of these relations to help Russia," Waigel


Chirac also offered moral support to Russia but insisted on


In an annual speech to French ambassadors in Paris, Chirac

said the international community should back efforts by IMF

chief Michel Camdessus to ease the crisis.

But he added: "His intervention today in Russia, with the

full support of the G7, will only succeeed if the essential

domestic reforms sought by President Yeltsin are implemented

resolutely by the new government of Chernomyrdin."

Chernomyrdin flew off to Ukraine suddenly on Wednesday to

meet Camdessus.

Chirac renewed a call for a strengthening of the IMF, in

particular by giving its policy-making interim committee

decision-making powers.

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