'Petersburg Dialogue' Expects Worst Is Yet To Come

July 15 (EIRNS)—The ninth annual meeting of the German-Russian Petersburg Dialogue, held this year in Munich, Germany, heard a lot of lip service paid to alleged successes in avoiding a meltdown of the banking system, but speakers and workshop participants admitted that the worst is yet to come for the real economy. The most explosive remarks came from Victor Zubkov, the Russian deputy prime minister, who is co-chairman of the Dialogue. He said that there is the big problem of "dirty money," of hundreds of billions in dope money that is traded at offshore centers, at centers legalized by "some states," and that one should investigate whether, and how, this dirty money contributed to the crisis, and what role it still plays.

Zubkov also mentioned the financial pyramids that were built, in spite of all the banking regulation which some German speakers had claimed had been very intense before the 2007 crisis erupted. Zubkov said, during the panel discussion, that mankind must pay attention to the real problem of 1 billion human beings suffering from hunger.

Yuri Shokin, director of the CIS Regional Business Development agency, said that behind the present unemployment figure of 10.5% in Russia, there is a lot of hidden unemployment, in shortwork arrangements in the car-making and construction sectors, and we do not know yet when the worst of this crisis will be reached, not to speak of when it will be overcome.

Heinz Herrmann Thiele, CEO of the German brakes manufacturer Knorr, said that it is insane that the Russian government has axed nearly all of its larger infrastructure projects, so that it has eliminated the basis for a rapid recovery of industrial production. Vasili Titov, vice-CEO of VTB (Vneshtorgbank), also voiced his doubts that Russia will be able to rebuild its industry quickly, because, coming from more than a decade of short-term credit policies, Russian banks have not developed a culture of long-term, low-interest credit for industry.

The discussion revealed significant limitations in outlook, since no big perspective of how the banking and credit system could be reorganized was offered. The only tiny step in that direction being what Vladimir Dmitrev, CEO of Vneshekonombank, said, when he portrayed a close partnership of his bank and the German Kreditanstalt für Wiederaufbau, in organizing long-term credit for projects. Dmitrev spoke of a government-to-government framework that is under discussion between Russia and Germany.

The Petersburg Dialogue goes back to a joint initiative of German Chancellor Gerhard Schröder and Russian President Vladimir Putin, and held its first conference in 2001, gathering about 250 politicians, scientists, journalists, entrepreneurs and bankers, churchmen, and artists from both nations. In discussions on the sidelines of the event in Munich, EIR reporters found interest in a New Deal and sovereign credit approach; some of the Russian participants, particularly from the Academy of Sciences milieu, were familiar also with the proposals of Lyndon LaRouche.