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Putin's economic plan

December 4, 2014

Russia's President has called for tough actions to revive the country's ailing economy in an address to the nation. Putin is facing mounting pressure to stop the bleeding after biting sanctions by the West.

Vladimir Putin
Image: Getty Images/AFP/Kirill Kudravtsev

President Vladimir Putin offered carrots and sticks as he presented plans to shore up Russia's capsized economy in his annual state of the nation address on Thursday.

Putin extended full amnesty for Russians repatriating offshore money, in an effort to counter capital outflows, which, officials say, are expected to rise above $145 billion (117 billion euros) this year alone.

"If a person legalises his assets and property in Russia, he receives firm legal guarantees...that there will be no questions from tax authorities or law enforcement agencies," he announced in Moscow.

"We all know that money has different origins, but I am convinced that the offshore chapter in our economic history must be closed for good."

Ruble in a tailspin

Russia's involvement in the Ukraine crisis has triggered a slew of crippling sanctions by the West, which have sent the country careening towards its first recession in six years and the ruble into a tailspin.

The 62-year-old President said he had ordered the central bank and government to take "tough actions" to stop ruble speculation after the currency tumbled to new all-time lows this week.

"I ask the Bank of Russia and the government to carry out tough coordinated actions to discourage the so-called speculators from trading on the fluctuations of the Russian currency," he said.

Recapitalising banks

Putin also said that he would tap the country's "rainy day" funds to prop up domestic banks hit by the sanctions and inject more money into the economy.

"We have a large amount of internal savings, they should become effective investments," Putin told members of parliament and other top officials attending the speech.

"Using our reserves, firstly, the National Wealth Fund, I propose to...recapitalise leading domestic banks with funds offered...to use for lending to the most important projects in the real sector of economy."

Russia's second- and third-largest banks, VTB and Gazprombank, have asked for up to 250 billion rubles (3.8 billion euros, $4.7 billion), plus 100 billion in additional support, to meet increased credit demand.

The National Wealth Fund, meant to cover future pension shortages, stood at $81.7 billion as of November 1.

No scaling back

Putin insisted that he would not sever ties with the West, even though relations are at their lowest level since the Cold War.

"Under no circumstances are we going to scale back our ties with Europe, America, at the same time we will revive and expand traditional ties with the south of the American continent, will continue cooperation with Africa, with countries in the Middle East."

pad/uhe (AP, AFP, Reuters)

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