With the Russian economy on the skids, Vladimir Putin took the draconian step of firing 10% of employees at Russia’s interior ministry.
That works out to 110,000 workers. However, most experts believe the austerity measure will serve only to send the economy into a deeper tailspin.
In a massive austerity move, Russian President Vladimir Putin has removed about 110,000employees from their jobs in the Ministry of Interior.
Last week, the President had signed an agreement to cut the workforce of the ministry to 10 percent, CNN Money reported.
The Russian economy contracted by 2.2 percent in the first quarter of the calendar year 2015.
The International Monetary Fund (IMF) estimated the country’s gross domestic product (GDP) to shrink by 3.8 percent this year. The agency projects its GDP to decline by over 1 percent next year.
The Russian government is planning to reduce its spending by nearly 10 percent to revive the economy. But analysts believe that the government’s latest austerity measures will result in further deterioration in the economy.
Russia is currently facing its worst economic crisis in years due to falling crude oil prices and sanctions imposed by the Western countries for Putin’s role in Ukrainian crisis.
International crude oil prices have halved in the past one year owing to oversupply concerns. The slump in oil prices has hit the Russian economy hard, as oil remains a significant contributor to the country’s exports.
The unemployment rate in the country rose to 5.4 percent in June compared to 4.8 percent in the same month last year.
After cutting his salary by 10 percent in March, Putin has asked all the government agencies excluding the Defense Department to cut their expenditure.
The Russian rouble has depreciated about 40 percent against the US dollar, fuelling the inflation rate in the country to over 15 percent.
Foreign investment has dropped to near zero in Russia due to the sanctions. That, and the bottom falling out of the oil market has led to large budget deficits, which are further exacerbated by inflation.
But a contracting economy is not going to dissuade Putin from ending his foreign adventures. In fact, if things get much worse, Putin may be tempted to take a page out of the authoritarian playbook going back decades and engineer a war to distract the populace.
While nearly unthinkable, recent provocations by the Russian president suggest he is probing, testing the resolve of the US and NATO. To what purpose, no one knows.