|March 27, 2002||atimes.com|
Putin orchestrates Central Bank coup
By Juliet Johnson
MOSCOW - The man Harvard economist Jeffrey Sachs once called "the world's worst central banker", Russian Central Bank chairman Viktor Gerashchenko, resigned on March 15 to the near-universal applause of foreign investors. But the international community should think twice before cheering his departure.
Gerashchenko's unexpected resignation signals an end to Central Bank independence in Russia. As such, it represents the final act in President Vladimir Putin's successful efforts to concentrate political and economic power in his own hands by removing all institutional centers of opposition to his rule.
As the last director of the Soviet Central Bank and the two-time head of its Russian successor, Gerashchenko is a savvy survivor who excelled at maintaining a relatively independent Central Bank by playing various political and economic forces off against each other.
Putin chose to move against the Central Bank now because Gerashchenko finally managed to offend all key factions at once, opening a window of opportunity. Domestic industrialists disliked his "strong ruble" policy, powerful commercial bankers objected to his views on banking consolidation and supervision, while foreign investors and advisers have looked askance at his leadership ever since his role in ending Russia's 1992 attempt at economic shock therapy. Gerashchenko, standing alone and under fire, found himself unusually vulnerable.
Yet the circumstances surrounding Gerashchenko's resignation reveal more serious reasons for concern. On March 15, Gerashchenko strongly denounced proposed legislation in the State Duma that would subordinate the Central Bank to a redesigned National Banking Council. The 13-member council would include three representatives from the government, three from the presidential administration, six from the legislature, and only one from the Central Bank. Gerashchenko correctly condemned the bill as "unconstitutional", but could not garner enough support to kill it. If passed, as seems likely, this legislation will undermine the Central Bank's independence de jure.
After his angry speech, Gerashchenko submitted his resignation to Putin. Using a standard Soviet-era formulation, presidential administration head Aleksandr Voloshin announced that Gerashchenko had resigned for "health reasons".
Although reports described the resignation as unexpected, Putin clearly was not surprised. He immediately advised the Duma to accept Gerashchenko's resignation and nominated Deputy Finance Minister Sergei Ignatiev to replace him.
Since leaving the Central Bank in the early 1990s, Ignatiev has served in a variety of government posts and, like Putin, is from St Petersburg. He is politically beholden both to Putin and to Finance Minister Aleksei Kudrin, and is not a particularly prominent figure. The Duma overwhelmingly approved Ignatiev's appointment last Wednesday.
Dislike for Gerashchenko, therefore, should not blind international observers to the more fundamental questions raised by Putin's opportunistic coup attempt at the Central Bank. Reducing the Central Bank's independence would not only violate the Russian constitution, but flout the norms of the international financial system.
Whatever one may think of his other policies, throughout his current term Gerashchenko has acted as a model central banker in tirelessly fighting for Central Bank independence and currency stability in Russia. Central bankers worldwide argue that only such independence can defend democratic states against politically inspired bouts of inflation. While Central Bank independence is not the economic panacea it is often made out to be, in political terms the cavalier way in which Putin has treated this institution belies his stated commitment to a democratic, constitutional order.
Moreover, this move fits a broader and disturbing authoritarian pattern in Putin's policy-making. Putin gained near complete control over the State Duma early in his term, reducing a once-feisty elected body to a rubber stamp for his policies. He restructured the legislature's upper house, the Federation Council, to ensure that it could not challenge him. He crushed former "oligarchs" Boris Berezovsky and Vladimir Gusinsky, not because of their economic rapacity - other oligarchs remain privileged and close to Putin - but because they questioned his politics. He created seven "super-regions" headed by presidential representatives in order to bring regional governments to heel. He has prosecuted a nasty war in Chechnya. Most recently and publicly, he quashed the remnants of a serious free opposition press in Russia. Gerashchenko and the Central Bank represented the last influential, independent check on presidential power.
Now Putin has made his final bid for control, ousting a central banker long denigrated by the West. True, Gerashchenko's policies have been oft-criticized on many fronts. But does the end justify the means? Gerashchenko's term was already scheduled to end in September, while the institutional consequences of his early removal could last far longer. The answer from the international community should be a resounding "no".
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