The State Duma on Wednesday approved a plan for the 1995 budget in a significant victory for the government, but then promptly passed a minimum wage bill that would make nonsense of spending projections and expand the budget deficit by more than 50 percent.
It took a third attempt for the legislature to pass the budget by a vote of 263 to 88, 27 votes more than the required majority of 226. But minutes later, the Duma voted 232 to 33 to give its final approval to a law nearly tripling the monthly minimum wage from 20,500 rubles ($5) to 54,100 rubles.
First Deputy Prime Minister Anatoly Chubais, while predicting the minimum wage decision would not hold, called it a "demonstration of political irresponsibility" by the State Duma, The Associated Press reported.
"It's totally absurd," he said. "Ninety percent of those sitting in the hall understand the pointlessness of these decisions, but they just want to look good."
Both bills have several hoops to clear before finally becoming law, but the minimum wage legislation would torpedo the budget if it came into effect because most social benefits in Russia and the salaries of all government employees are paid in multiples of the minimum wage.
"It's clear that when these two decisions clash, the budget will win out," Chubais said.
Finance Minister Vladimir Panskov said last week the raise would cost the federal budget 56.7 trillion rubles ($14.2 billion) and hit local budgets for another 139 trillion rubles. The budget deficit the Duma approved for 1993 before passing the minimum wage law was 73.2 trillion rubles.
The struggle to pass the budget is being watched closely. An International Monetary Fund delegation, currently in Moscow to negotiate a $6.4 billion loan for Russia, remains unconvinced that the government can meet its deflationary targets, Reuters reported.
"We're reading tea leaves," the agency quoted a source close to the talks as saying. "It's unclear which way the wind will blow."
Passage of the highly inflationary minimum wage bill is unlikely to help. Given the astronomical costs of the wage raise, Duma Budget Committee chairman Mikhail Zadornov cautioned deputies Wednesday that passing it would "amount to merely throwing away the budget."
After the vote, Panskov appeared bewildered.
"I see no way out of this situation," the minister told reporters. "The fact that this law was passed after the basic figures of the budget were approved means that by the third reading of the budget, the government will have to cut practically all spending articles."
Wednesday's dramatic debate saw several compromises between the government and deputies emerge, fall apart and reemerge. Panskov said earlier this week he was certain of the budget plan's approval on Wednesday because he felt he had reached a compromise with the Agrarian Party, which had hitherto voted against the budget.The Agrarians demanded that agricultural subsidies be preserved at the 1994 level, and the government tentatively agreed to impose a special 1.5 percent value-added tax that would mostly be used to finance agriculture.
But during the debate, Agrarian Party member Gennady Kulik accused the government of trying to dupe the faction after Deputy Finance Minister Vladimir Petrov said subsidies were subject to further readings.
"This is our last word on this budget," Kulik said. "We will not vote for it." The faction subsequently gave in to assurances from Chubais, but then voted in force for the minimum wage bill, seemingly heedless of the contradiction between it and the budget.
The wage-hike proposal was defeated last week, after Vladimir Zhirinovsky's ultranationalist Liberal Democratic Party faction struck a deal with the government. But on Wednesday, the deal was clearly off without its details ever becoming public, and the bill was passed in its third and final reading with supporters saying that government estimates of how much the wage raise would cost were exaggerated.
Zadornov agreed the bill would not be as costly as Panskov had predicted. He estimated its possible damage to the budget at 30 trillion rubles -- still almost 50 percent of the planned deficit.
The government could, however, still be home safe if the minimum wage law is vetoed by the Federation Council, the Russian parliament's upper house, or by President Boris Yeltsin.
"I hope the Federation Council votes down this law," Panskov said. "The senators represent the regions, and they understand that local budgets will have to shoulder two-thirds of the cost of this raise."
Despite this argument, wage raises have always been hard for Russian legislators to veto because of their populist value.
As the budget now stands, spending and revenue targets, upped to account for the special 1.5 percent tax for the Agrarians, have been set at 248.7 trillion rubles and 176.5 trillion rubles respectively, leaving a deficit of 73.2 trillion rubles. The budget still has two readings to go through in the Duma before moving on to the Federation Council and the president. The first two have required 17 votes in the Duma. The next, third reading, is seen by observers as the hardest one.
-- Svetlana Vinogradova contributed to this article.
It took a third attempt for the legislature to pass the budget by a vote of 263 to 88, 27 votes more than the required majority of 226. But minutes later, the Duma voted 232 to 33 to give its final approval to a law nearly tripling the monthly minimum wage from 20,500 rubles ($5) to 54,100 rubles.
First Deputy Prime Minister Anatoly Chubais, while predicting the minimum wage decision would not hold, called it a "demonstration of political irresponsibility" by the State Duma, The Associated Press reported.
"It's totally absurd," he said. "Ninety percent of those sitting in the hall understand the pointlessness of these decisions, but they just want to look good."
Both bills have several hoops to clear before finally becoming law, but the minimum wage legislation would torpedo the budget if it came into effect because most social benefits in Russia and the salaries of all government employees are paid in multiples of the minimum wage.
"It's clear that when these two decisions clash, the budget will win out," Chubais said.
Finance Minister Vladimir Panskov said last week the raise would cost the federal budget 56.7 trillion rubles ($14.2 billion) and hit local budgets for another 139 trillion rubles. The budget deficit the Duma approved for 1993 before passing the minimum wage law was 73.2 trillion rubles.
The struggle to pass the budget is being watched closely. An International Monetary Fund delegation, currently in Moscow to negotiate a $6.4 billion loan for Russia, remains unconvinced that the government can meet its deflationary targets, Reuters reported.
"We're reading tea leaves," the agency quoted a source close to the talks as saying. "It's unclear which way the wind will blow."
Passage of the highly inflationary minimum wage bill is unlikely to help. Given the astronomical costs of the wage raise, Duma Budget Committee chairman Mikhail Zadornov cautioned deputies Wednesday that passing it would "amount to merely throwing away the budget."
After the vote, Panskov appeared bewildered.
"I see no way out of this situation," the minister told reporters. "The fact that this law was passed after the basic figures of the budget were approved means that by the third reading of the budget, the government will have to cut practically all spending articles."
Wednesday's dramatic debate saw several compromises between the government and deputies emerge, fall apart and reemerge. Panskov said earlier this week he was certain of the budget plan's approval on Wednesday because he felt he had reached a compromise with the Agrarian Party, which had hitherto voted against the budget.The Agrarians demanded that agricultural subsidies be preserved at the 1994 level, and the government tentatively agreed to impose a special 1.5 percent value-added tax that would mostly be used to finance agriculture.
But during the debate, Agrarian Party member Gennady Kulik accused the government of trying to dupe the faction after Deputy Finance Minister Vladimir Petrov said subsidies were subject to further readings.
"This is our last word on this budget," Kulik said. "We will not vote for it." The faction subsequently gave in to assurances from Chubais, but then voted in force for the minimum wage bill, seemingly heedless of the contradiction between it and the budget.
The wage-hike proposal was defeated last week, after Vladimir Zhirinovsky's ultranationalist Liberal Democratic Party faction struck a deal with the government. But on Wednesday, the deal was clearly off without its details ever becoming public, and the bill was passed in its third and final reading with supporters saying that government estimates of how much the wage raise would cost were exaggerated.
Zadornov agreed the bill would not be as costly as Panskov had predicted. He estimated its possible damage to the budget at 30 trillion rubles -- still almost 50 percent of the planned deficit.
The government could, however, still be home safe if the minimum wage law is vetoed by the Federation Council, the Russian parliament's upper house, or by President Boris Yeltsin.
"I hope the Federation Council votes down this law," Panskov said. "The senators represent the regions, and they understand that local budgets will have to shoulder two-thirds of the cost of this raise."
Despite this argument, wage raises have always been hard for Russian legislators to veto because of their populist value.
As the budget now stands, spending and revenue targets, upped to account for the special 1.5 percent tax for the Agrarians, have been set at 248.7 trillion rubles and 176.5 trillion rubles respectively, leaving a deficit of 73.2 trillion rubles. The budget still has two readings to go through in the Duma before moving on to the Federation Council and the president. The first two have required 17 votes in the Duma. The next, third reading, is seen by observers as the hardest one.
-- Svetlana Vinogradova contributed to this article.
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