Mark Harrison

Russia’s Crisis, Greece’s Tragedy

Writing about web page KIng at odds with ECB on eurozone crisis

On the plane back from Moscow, I read Martin Gilman’s No Precedent, No Plan: Inside Russia’s 1998 Default (MIT Press, 2010). Gilman was the IMF’s man on the spot during the Russian debt crisis of August 1998.

I flew into Moscow a few days after that crisis broke. Business life seemed to be paralysed. Many people that I met were panicked or in despair. But in retrospect, Gilman points out, this was the start of Russia’s sustained recovery from the economic collapse that accompanied the breakup of the Soviet Union.

The crisis itself was very ugly. The disarray in Russia’s public finances had built up over years, with persistent overspending, repeated failures to generate taxes, and the high inflation and high interest rates that resulted. In the private sector, Russian banks borrowed in dollars at low interest rates and bought up high-interest ruble bonds. In the crisis, the exchange rate plunged by a third, resulting in widespread bank insolvencies.

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