Putin for Pensions?

Greg Bryanski of Thomson Reuters reports that Russia's Putin sees economy boost from higher pensions:

Russian pensioners who will have 46 percent more money in 2010 than this year will provide a much needed boost for the flagging economy as they spend, Prime Minister Vladimir Putin said on Wednesday.

'Our decision to increase pensions may contradict (the goal of maintaining macro stability). But at the same time it is a stimulus. It is consumption,' Putin told a pensions conference in Moscow.

Putin said the pensioners, who spend 80 percent of their meagre income on consumption, shun expensive imported goods and tend to buy domestically produced ones.

Russia, hit harder by the economic crisis than most other major emerging economy, is very slow to recover due to the very weak domestic demand and Putin has vowed to continue stimulus policies, helping the demand recover.

Russia is raising pensions by 35 percent in 2009 and plans to raise them further in 2010, envisaging to spend a staggering 10 percent of GDP on pensions and other social benefits.

As a result of the increase, the average pension will rise to 8,000 roubles ($277.4), breaching the minimum subsistence level and achieving a replacement ratio of 39.7 percent on the average post-crisis salary.

The pensions increase will also bring an eight percentage points hike in social security taxes to 34 percent of income from 2011, a move generally opposed by businessmen.

So what gives? Did the Christmas spirit strike Vladi early this year? Or could it be that polls are showing support for Putin and Medvedev is falling:

Prime Minister Vladimir Putin's approval rating has fallen to an eight-month low, a poll said on Wednesday, as faith in Russia's leaders is tested by an economic crisis that has put more than one million people out of work.

Despite a sharp deterioration in the economy, Putin and ally President Dmitry Medvedev have enjoyed high ratings since they took up their posts last year. But polls have shown their public approval fall steadily in recent months.

Public trust in the work of Putin fell from a peak of 72 percent in mid-October to 65 percent on November 22, the lowest point since March, according to weekly poll figures posted on the site of the Public Opinion Foundation on Wednesday.

Medvedev's rating stood at 54 percent, down from 62 percent in October.

"This is extremely serious for the government," Moscow Carnegie Centre analyst Nikolai Petrov said. "In the absence of any stable political institutions, Putin's popularity is the foundation of the country's political stability."

He said the fall was clearly caused by the economic crisis, and government decisions to raise pensions and scrap a controversial transport tax were efforts to stem the fall.

Russia remains mired in a deep economic crisis, with GDP contracting 8.9 pct in the third quarter from a year earlier. Unemployment has climbed by more than a third, from 4.1 million in May last year to 5.8 million in October.

Trust in the prime minister's office fell from 80 percent in August to 73 percent in November, according to rival pollster VtSIOM. A third poll from the Levada centre registered a fall in trust in Putin from 66 percent in August to 60 in November.

"Putin and Medvedev's ratings are not directly dependent on what they do and say, they reflect the general situation in the country," Levada Centre analyst Denis Volkov said. "We have seen a steady fall, but no collapse."

Public trust in Medvedev fell from 58 percent in August to 51 percent in October, according to the Levada Centre. The

Kremlin-aligned analyst Sergei Markov warned against reading too much into the poll ratings, saying ratings always fell as Russia's long, grey winter.

"They'll get better again in May when the sun comes out," he said.

Regardless of the reasons, I think Putin is onto something. Now, if only we can figure out a way to redistribute income from Wall Street crooks back into the pensions they keep plundering.