INTERVIEW-Russian ex-PM Gaidar sees stable rouble, backs Putin

By Darren Ennis

BRUSSELS, March 10 (Reuters) - A main architect of Russia's market economy has backed Prime Minister Vladimir Putin's view that the rouble will not drop further and praised Moscow's handling of the worst financial crisis in nearly 80 years.

"If oil prices don't fall much further then I don't think it (the rouble) will fall," former Russian Prime Minister Yegor Gaidar told Reuters in an interview.

"If the oil price goes lower, then the central bank will adjust the rouble to its proper level. But I do not see any fall," he said on a visit to the EU-Russia Centre think tank in Brussels.

Over the course of several months, Russia's central bank has eased the currency's value down by a quarter relative to a dollar/euro basket in response to a sharp drop in the price of oil, Russia's main export commodity.

That move caused many Russians to change their savings into dollars or euros, fearing a total collapse of the home currency. But Putin said last week there would be no sharp drop in the rouble's exchange rate. [ID:nL4893036]

"The exchange rate policy of the last half of the year was quite right," Gaidar said.

"If you left the exchange rate at the level when the price of oil was at or higher than $100 per barrel rather than at $40 per barrel, then that would have been wrong and a grave mistake.

"Because of our policy, the rouble is not regarded as overvalued, so there is no strong pressure on the rouble," he added.

The Russian central bank supports the rouble through high interest rates and tight liquidity, prompting criticism from industrialists who complain about prohibitive lending rates stifling their enterprises.

MISTAKES MADE

Gaidar, who became prime minister under then-president Boris Yeltsin in 1992, just after the Soviet regime fell, said the Kremlin "had made mistakes" during the economic crisis, but Moscow was "now well-prepared" to cope with the downturn.

"Russia has learned some lessons from the corpses of the Soviet Union, which has helped it cope well," Gaidar said.

"On financial and monetary policy, the most important thing for the Kremlin now is not to make mistakes. They must continue with the course which is now in place.

"We need asymetric action ... (an) increase of the real interest rates, (a) decrease of budgetary expenditures. For us it is the stability of the currency, banking system and in the end financial stability that matters," Gaidar added.

He said he could not say when Russia might recover from the downturn.

Russia's 10-year boom fuelled by foreign investment and lucrative commodity reserves came to a halt last autumn when energy prices plummeted. The economy contracted 8.8 percent year-on-year in January. [ID:nLO665871] "Russian recovery will more or less go hand in hand with global recovery," Gaidar said.

While backing Putin and Russian President Dmitry Medvedev's economic policies, Gaidar said not everyone in Russia would agree and there "is a real risk of popular unrest".

"There is this real possibility when you haven't got a yearly increase in real wages in 10 years. I think you can certainly expect some unrest," he said.

"Rises in unemployment, a decline of real wages, the chances of unrest are increasing."

(Editing by Guy Dresser)