New Team, Old Answers for Russia's Economy

What is Yevgeny Primakov going to do about the stricken economy? That is the question after his appointment as prime minister led to a sigh of relief over the end of a political deadlock that was driving Russia to ruin.

Mr. Primakov, a former foreign minister whose expertise lies in diplomacy, not finance, appointed two Communists to top economic posts: Viktor Gerashchenko as Central Bank chief and Yuri Maslyukov as deputy prime minister for economic policy.

Experts here now expect more printing of money, more spending, more state control, and less emphasis on collecting taxes as demanded by foreign creditors.

"These appointments mean a reversal of movements toward liberal reforms," says Sergei Aukutsionek, director of the Russian Economic Barometer, a think tank in Moscow.

The fragility of capitalist reforms was evident during the past month when the government, banks, and companies defaulted on debts, and the ruble and financial markets collapsed.

In his first speech as prime minister Friday, Primakov hinted at more central control despite a vague commitment to reforms.

It appears the days of young reformers are over: It is the comeback of men in their 60s who made their names - and mistakes - in another generation.

The new economic main man, Yuri Maslyukov, is a Communist moderate who headed the Soviet agency of economic planning, Gosplan, under Mikhail Gorbachev in the late 1980s.

Mr. Maslyukov, who served as trade and industry minister in President Boris Yeltsin's previous Cabinet, favors strong support for industry, printing of more money, and more state spending.

Mr. Gerashchenko's popularity with Russian bankers is not shared by many Westerners. He was once described by Harvard University economist Jeffrey Sachs as the world's worst central bank director.

Gerashchenko was fired from the same position four years ago, after "Black Tuesday" when the ruble lost nearly three-fourths of its value. He has been blamed by many economists for hyperinflation in the early '90s when printing presses cranked up to pay state debts. All signs are that he will do the same thing again.

With trade unions threatening a national strike Oct. 7, politically he may have no choice but to print more money to pay back billions of rubles in wages owed to workers. "The current political regime cannot exist without printing more money," says Mikhail Kiselov of the Institute of National Models of Economy in Moscow.

Gerashchenko also will have difficulty striking a balance between protecting the ruble and producing more money. He wants a steady exchange rate and does not favor methods such as linking the ruble with a strong foreign currency like the dollar.

Economists are waiting to see the rest of the economic team and whether it will include Boris Fyodorov, the tough tax chief.

The Communists have shown little enthusiasm for improving tax collection, a condition of the International Monetary Fund (IMF) for further aid. Such measures would be more difficult now, with feisty regions threatening to withhold revenue from the federal government.

The government also faces the nearly impossible task of wooing an international community deeply disenchanted with Russia.

Following Russia's default on debt, the IMF will be wary of releasing another installment of a promised $22.6 billion loan.