Transcript of the beginning of the meeting:

Vladimir Putin: Mr Medvedev, as I understand, the budget is almost finished?

Dmitry Medvedev: Yes, Mr Putin. The Government has finished its work. The draft budget will be introduced to the State Duma within the next several days. Over the past few days, the Government worked intensively in order to incorporate several proposals made during the Government meeting. These proposals concern the social sphere: the salary of professors and teaching staff, and other proposals. The Government reviewed a range of issues that concern additional revenue (I’ll address this issue later). We have some room for manoeuvre.

I will not hide the fact that the draft budget for 2013 is tough, as is the budget outlook for 2014 and 2015. That’s why we need to compose ourselves and count each kopeck, but perhaps this isn’t a bad thing and it will improve executive and budget discipline at the federal, regional and municipal levels.

Vladimir Putin: Yes, as you know, we’ve discussed this issue with our colleagues. This is the first budget drafted by the current Government. This is the first budget drafted by the current Finance Minister. This is a crucial moment for the team, the people who drafted it and for the entire country. This is the country’s main financial document for the next year, and it is very important.

Yes, it is very tough. I believe that the budget rule introduced by the Government reflects the realities of our economy, and we must do everything possible to implement it. That’s why the budget is so tough. I want to express my gratitude to you and your colleagues for their efforts to resolve the most pressing social issues, for instance the increase in wages of public sector culture workers.

Despite the fact that the budget is very tough, it appears that several of its paragraphs are too tough and several social problems have remained unsettled, but we managed to take a step forward and support people, especially those who work in this sphere, which is sensitive for the Government, but where wages are quite low. These people can be called enthusiasts in the true sense of the world.

We are aware of what has recently been going on in the prospering market-driven economies, including European ones. Not a single budget item increased in these economies, only consolidation. All social spending was lowered and the retirement age has spread. Spain is the site of the latest important developments. We must keep this in view, bear in mind all the risks to which our economy is exposed due to the condition of the global and European economy and do everything possible to meet our obligations to our citizens. And the draft budget seems to have been drawn up in the proper way.

Dmitry Medvedev: That’s absolutely characteristic. The budget is tough, but it is still socially oriented. We managed to preserve this orientation for the last 12 years. No matter the conditions in which the budget is drafted (I remember how we drafted the budget in 2009 and 2010 when the conditions were even more complicated), all of our social commitments have been kept in this budget.

Even despite the budget rule that you’ve mentioned, Mr Putin, we managed to do this. We are applying this rule for the first time. There were lots of arguments, but this is a guarantee protecting us from fluctuation of oil and gas prices. That’s a guarantee that our country will be protected in case of the deterioration of the global economic environment.

Vladimir Putin: We already discussed social issues and it’s very good that the Government managed to resolve these urgent problems. The budget is socially oriented, but it should be aimed at development. I know that the Government found a way to fully capitalise our Direct Investment Fund, which is one of the main elements of the innovative development of our economy. That’s the first thing.

Second, the development of the export-oriented and hi-tech economic industries as well as industries affected by our accession to the World Trade Organisation (WTO). I believe these are the key issues related to economic development; they should be taken into account.

Dmitry Medvedev: This has been stipulated in the budget. The Direct Investment Fund you mentioned was established to invest in the most important spheres, including the development of cutting-edge technologies.

These investments have been scheduled along with protective measures taken in response to Russia’s accession to the World Trade Organisation. We’ve long been seeking to join the WTO, but membership should not destroy any of our economy’s industries.

That’s why the programme for the development of the agriculture industry to 2020 stipulates significant annual subsidies; we have put more money into this programme. We have preserved the zero interest rate that is usually applied when working with agricultural producers and made the zero interest rate permanent.

Other sensitive industries should be backed by budget funding and loans. I mean automakers, aircraft manufacturers and several other industries.

Vladimir Putin: You were the one who initiated the founding of the Direct Investment Fund.

Dmitry Medvedev: Yes, I did.

Vladimir Putin: We must support it.

<…>