Russia to Criminalize Debt?

shopping103108.jpgThese are tough times for the Russian economy – and those days when the political leadership was bragging about its easy liquidity and its status as a shelter during the storm seem quite distant indeed. Credit is tightening up, so major international banks and financial institutions are all calling for early repayment of their loans to big businesses, and Russia’s many over-leveraged multi-billionaires are finding themselves hard pressed to come up with cash to keep the various companies and assets they have pledged as collateral. One need not worry about the fates of the country’s numerous billionaire elite businessmen. Today trading surged on the Russian markets for the first time in weeks after the state bank VEB deployed the first measures of its rescue plan for Mikhail Fridman and Oleg Deripaska, and no doubt many others will follow. But what about ordinary Russian citizens, struggling to pay off debts with rising prices, unemployment (Severstal cut its workforce by 25%), and upcoming inflation? Toss them in the gulag. Echo Moskvy reports on a new law going through the Duma which will make citizens criminally liable for prison sentences if they fail to repay loans. Sure, that ought to encourage small business innovation. Translation below.

Non-return of a loan will become a criminally punishable offense30.10.2008 Non-return of a loan will become a criminally punishable offense, – the corresponding amendments are being introduced to the State Duma. Appearing as the initiators were members of the Duma Committee on Financial Markets.What is proposed is to initiate criminal cases for overdue indebtedness on loans, starting with 10 thousand rubles. Today criminal liability arises in the event that the sum of the debt exceeds 250 thsd.According to the data of Russian newspapers, towards the middle of next year overdue indebtedness on loans may increase in our country to 5-10%.In the opinion of the head of the head of the Analytical department of the investment company “Fainenshl Bridzh” Alexey Serov does not rule out that in the nearest time the number of non-payments will increase by several times.Member of the Duma Committee on Financial Markets Anatoly Aksakov declared to “Echo Moskvy” that the proposed draft law is aimed at the struggle, first and foremost, with those who intentionally do not return loans.Categorically against toughening criminal liability for the non-return of loans expresses member of the Budget Committee of the State Duma Yevgeny Samoilov.The proposed measures in no way contribute to the normalization of relations between a bank and borrowers. Of this is confident head of the Management Board of the Confederation of consumers’ societies Dmitry Yanin. He considers that current legislation contributes with complete success to the struggle with non-payers. Yanin brings attention, that under the new law risk falling hundreds of thousands of citizens who had obtained loans several years ago at huge interest, which they are still unable to pay off.

Photo: A man shopping at a local supermarket Moscow, Monday, Oct. 20, 2008.(AP Photo/Misha Japaridze)