Long-term consequences of extraordinary measures taken in Cyprus are not known yet – Putin

(Interfax – SOCHI, April 22, 2013) Russian President Vladimir Putin said the long-term consequences of the extraordinary measures taken in Cyprus are not known yet.

“We see what methods of resolving debt problems are used on specific countries, I mean Cyprus, where the measures that have been taken essentially undermine confidence in the financial system,” Putin told a meeting on economic issues.

“Experts are divided on how these extraordinary actions will reflect on the further developments of events in Europe and what the long-term consequences will be,” he said.

The euro zone economy contracted 0.6% in 2012 and “a difficult situation is shaping up on the debt markets in specific euro zone countries; true, there have been certain favorable signals recently in that sense, but nonetheless the situation remains difficult,” Putin said.

Negative trends have also appeared in the Asia-Pacific region, where growth had previously remained strong despite problems in the global economy, he said. Japan’s government is taking serious measures to revive the economy, mainly through an unprecedented increase in the money supply. China has also seen some slowing in the pace of economic growth, he said.

A difficult situation has also been unfolding in the U.S., although analysts are making quite optimistic forecasts. “The U.S. has embarked on significant spending cuts and while it is still too early to assess, they will have an effect on the U.S. economy,” he said.

The IMF has lowered its U.S. economic growth forecast to 0.2% and has revised its forecast for global economic growth downward, to 3.3% from 3.5%.

Russia must be prepared for a drop in economic activity and for crisis situations in the global financial system that might affect the nation’s economy, Putin said.