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Wednesday, May 07, 2008

Russians Beg for Mercy from Tsar Dimitry

The Moscow Times reports:

Thousands of people used traditional May Day marches to call for something new: an end to rising food prices. The protests against rising inflation and living costs coincided with an end on May 1 to government-led price freezes on selected goods, a voluntary curb agreed on by food wholesalers and producers last October as a measure to stem inflation. The protests, staged in Moscow, St. Petersburg, Yuzhno-Sakhalinsk, Volgograd, Stavropol and other cities, highlight a key challenge facing President-elect Dmitry Medvedev when he assumes power on Wednesday.

The protests are very topical, Dmitry Yanin, head of the Moscow-based International Consumer Societies Confederation, said Sunday. "People remember the 1990s when inflation was very high, and of course people are very worried," he said by telephone. In Moscow, Communist Party leader Gennady Zyuganov told May Day crowds that more than 5 million of the country's poorest people were barely surviving on 5,000 rubles ($210) per month amid rising housing costs. Communist supporters carried banners saying, "Everyone should have the right to a free apartment."

A pro-Kremlin march organized jointly by the Federation of Independent Trade Unions and United Russia called for the "rise in wages to exceed the rise in prices." The refrain was also taken up in Volgograd, where demonstrators called for higher salaries, the Regnum news agency reported. In St. Petersburg, marchers chanted, "No to high prices!" and "Putin's Plan means high prices," Reuters reported. In the Far East, protesters in Yuzhno-Sakhalinsk called for higher wages and for the government to take measures to bring down prices for fuel and food.

The battle cry for higher wages and pensions and lower food costs was taken up at May Day rallies around the world, with clashes between police and protesters in Turkey leaving nearly 40 people injured, while crowds rallied against the rising cost of food staples throughout Asia. In Paris, nearly 120,000 people marched to call for higher wages and pensions, while 25,000 people turned out in Madrid to voice their concerns over growing unemployment, Agence France Presse reported. Rising inflation has emerged as a global phenomenon in the light of poor harvests, the growing use of grain in biofuels production and rising demand from economies such as China. A growing number of governments, economists and NGOs have warned of a deepening global food crisis.

Here, the authorities have pointed to rising food prices as the chief driver behind spiraling inflation, yet Russians are facing higher costs in every aspect of their lives, from apartments to fuel. As of April 28, consumer prices had risen by 6.3 percent in the year to date, according to the State Statistics Service, throwing doubt on the government's ability to keep inflation to its target of 9 percent to 10 percent by year's end. Inflation officially rose to 11.9 percent last year, far outstripping the government's forecasts.

"The Federation Council is extremely disturbed by the uncontrollable increase in food prices and inflation," said Oganes Oganesyan, head of the council's committee on economic policy, Interfax reported. "We will react to the situation, particularly after the end of the ban on price increases on food products." He proposed empowering the government to react quickly to sudden price increases, enabling it to limit price increases on certain products in a similar way to its actions over the past six months.

Marina Kagan, an executive director at Wimm-Bill-Dann, the country's largest juice and dairy producer, welcomed the end to the voluntary price freezes, but said they were "never material" to the company, accounting for just 3 percent of its revenue. "At the time, it was probably the right thing to do because people needed to see some action," she said, adding that the company would continue to adhere to voluntary price freezes in some regions.

Analysts said they did not expect prices to rise significantly in light of the lifting of the price freezes — which was limited to "socially significant" products such as milk and cooking oil — but in some areas, such as Vladivostok, staple products had already risen by as much as 2 rubles since May 1, RIA-Novosti reported Sunday. Yanin said prices would continue to grow, irrespective of the agreement reached with wholesalers and producers. "I don't think this agreement had any influence on prices," said Yanin, noting that prices had grown, although at a slower rate, in spite of the freeze.

The government has come in for some harsh criticism from economists for fueling inflation through increased budgetary spending and reluctance to take substantive measures to bring it down. In particular, the government has poured money into boosting wages and pensions. According to the Health and Social Development Ministry, real incomes have risen by an average of 25 percent in the last two years, above official inflation figures. Economists view such wage hikes as another contributor to rising prices. "Usually street protests are very powerful tools to push the government into advertising its measures," said Yulia Tseplyayeva, an economist at Merrill Lynch. "I expect more public efforts … to demonstrate that [the government is] doing something, rather than anything practical."

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