Russian prime minister Vladimir Putin has called for concerted action to break the stranglehold of the US dollar and create a new global structure of regional powers.
“The one reserve currency has become a danger to the world economy: that is now obvious to everybody,” he said in a speech at the World Economic Forum.
It is the first time that a Russian leader has set foot in the sanctum sanctorum of global capitalism at Davos.
Mr Putin said the leading powers should ensure an “irreversible” move towards a system of multiple reserve currencies, questioning the “reliability” of the US dollar as a safe store of value. “The pride of Wall Street investment banks don’t exist any more,” he said.
For all his bluster, Mr Putin’s bargaining power is weakening by the day. Russia’s foreign reserves have fallen by 34pc since August to $396bn (£277bn) after months of capital flight and the collapse in the price of Urals crude oil to $45 a barrel. The rouble also fell to a record low yesterday after sliding for weeks in a controlled devaluation.
Mr Putin said: “We are witnessing a truly global crisis. The speed of developments beats every record, and the strategic difference from the Great Depression is that under globalisation this touches everyone. This has multiplied the destructive force. It looks exactly like the perfect storm.”
The Soviet Union avoided depression in the 1930s due to its totally closed autarkic system, although the regime inflicted other terrible hardships.
However, Mr Putin’s own government in Russia is facing mass protest as unemployment surges and austerity measures start to bite.
The Kremlin expects the Russian economy to contract by 0.2pc this year. Expecting a deep global downturn, it has redrafted its budget plans based on oil prices at $41 this year, entailing drastic cuts in public spending.
By Ambrose Evans-Pritchard in Davos
Last Updated: 11:13AM GMT 29 Jan 2009
Source: The Telegraph