08/27/1998 12:23:56 West says no financial bail-out for Russia
By Robert Mahoney
BONN, Aug 27 (Reuters) - Germany, Russia's biggest creditor,
led Western countries on Thursday in warning Moscow it would
receive no cash bail-out without sweeping economic reform.
German Chancellor Helmut Kohl voiced concern about the
financial crisis in Russia, where the central bank suspended
currency trading to stop the rouble extending Wednesday's 40
percent plunge against the mark.
German officials said Kohl would speak to U.S. President
Bill Clinton and British Prime Minister Tony Blair about the
economic and political upheaval in Russia which has rattled
world financial markets. Kohl had already spoken to French
President Jacques Chirac, they said.
"Without the reforms it will not be possible to mobilise
money either from international financial organisations or from
Germany," Kohl told reporters on a visit to Berlin.
He said he wanted to sound out Western governments about how
to help Russia restructure its tottering economy.
"If they don't follow through (on reforms) the situation
will look bad," Kohl said.
Panic spread across Russia as people tried to swap fast
depreciating roubles for scarce dollars.
Acting Prime Minister Viktor Chernomyrdin was trying to put
together a government, while President Boris Yeltsin, whose
authority is in question, was holed up at a residence outside
Western leaders fear the Russian crisis could spill over to
other financial markets.
French Finance Minister Dominique Strauss-Kahn said the West
was willing to help out Russia, but Moscow must do its part by
pushing through economic reforms.
"What must be seen is that we are all committed to doing our
best to help the Russian economy," he told Reuters television.
"We are totally committed to helping Russia."
Strauss-Kahn said the impact of the Russian crisis on France
would be "limited but real" and said he was considering revising
down his forecast for French economic growth next year.
He also confirmed that he and his German counterpart Theo
Waigel were mulling sending a joint letter to Chernomyrdin on
the crisis, but had not yet agreed to do so.
In Frankfurt, the Xetra DAX stock index fell more than four
percent to nearly four-month lows after the Russian central bank
suspended roubled foreign exchange trade. German banks, which
have an estimated $30 billion exposure to Russian debt, were the
In Tokyo the share market dropped three percent to close at
a six-year low.
"The Russian factor seems to have had some impact on Latin
American markets and we can't deny its impact on Japanese stocks
either," said Japan's Vice Fiance Minister Koji Tanami.
"We are very worried about this," he said.
Western officials said it was not clear how the
industrialised powers could help turn the tide in Moscow but
they ruled out fresh cash to prop up an ailing system.
Last month the International Monetary Fund put together a
$22.6 billion rescue package but Moscow spent most of the first
tranche of this on its failed defence of the rouble.
"There are no shortcuts in restoring market confidence, and
the next steps are up to the Russians," White House deputy
spokesman Barry Toiv told reporters in Edgartown, Massachusetts,
where U.S. President Bill Clinton was on vacation.
"Now more than ever it's critical that they get their fiscal
house in order and establish policies on the rouble, on
government debt and the banking system that will lead Russia
back to financial stability," he said.
Amid rumours of an economic meltdown Yeltsin sacked his
entire government four days ago and brought back his old ally
Chernomyrdin, whom he had fired just five months earlier.
Chernomyrdin has not said how he intends to handle the
crisis. But Germany's Economics Minister Guenter Rexrodt
dismissed suggestions that Chernomyrdin was hostile to reform.
"I have never had this impression. Chernomyrdin wants
reforms and will also engineer them," Rexrodt said.
With his pragmatic nature, the new prime minister could get
more happening than all those who talked about reforms but could
not bring them about, Rexrodt added.
Rexrodt said the Russian crisis would not have any serious
effects on the German economy or on local investors here.