Putin expresses fears over economy

Putin: Russia has "only relative economic stability"

MOSCOW, Russia -- President Vladimir Putin has expressed concern over the performance of the Russian economy during a key speech.

Putin, making his first "state of the nation" speech said the economy is his country's top priority.

It was the first time the 49-year-old had made the high profile speech to the Duma, or lower house, and the Federation Council, or upper chamber, after being elected almost exactly a year ago.

The president told both chambers that recent data showed there was reason for concern over the economy.

"In the last few months the worsening state of several economic indicators raises concern, especially against the background of the uncertain development of the world economy," he said.

AUDIO CNN's Jill Dougherty: Russia wants to become part of the WTO 368K/35 sec. AIFF or WAV sound   MESSAGE BOARD Changes in Russia

"So far we only have relative economic stability."

Russia last year achieved 7.7 percent Gross Domestic Product (GDP) growth, but this year it is feared it will struggle to meet its four percent target.

Putin also outlined changes needed on a spectrum of issues from prison reform to education, health, pensioners, science, land rights and capital freedom.

But throughout Tuesday's speech, which lasted more than an hour, he stressed the need for economic change both on the domestic front and in Russia's international relations.

CNN's Jill Dougherty said Putin faced a dilemma because he "wants stability but also wants change."

"His fear is that if things stay the same things could stagnate," Dougherty added.

Putin referred to the past 10 years as being ones of revolution, but promised there would not be a counter-revolution as in Russia's past.

Through "hard work, a powerful economic stability and a powerful administration," Russia and its people would prosper, he said.

Bureaucracy and a suffocating legal structure had prohibited Russians and would need reform.

Putin also called for currency freedoms and a reduction in customs duties.

The president said a reformed pension structure would prevent a cash-in hand economy that was taking hold in the country.

"People should have the incentive to switch from cash-in hand to the payroll. Most people are limited by earning illegally."

He also pledged the "average pension should be above the minimum income level." "If we retain the existing system we will not be able to provide a decent life for our senior citizens."

Putin said Russia should look at private education and the benefits of scholarships.

"We have to build an independent system of accreditation and funding of education," he said.

Russia and the WTO

By establishing a strong economy and changing economic laws Russia could move towards its goal of becoming a member of the World Trade Organisation, Putin added.

"By the end of this year we need to adjust our legislation in line with the WTO," he said.

Russia, he added, should only borrow money when it "knows how to disperse and repay it."

Putin also looked at improving relations with the international community -- "putting more energy" into its ties with Europe and the European Union.

He also supported the United Nation's Security Council as a tool for using "power and the threat of power" to resolve international problems.

By moving away from "political dogmatism" within Russia it could achieve the "respect from our foreign partners," he said.

The president also paid tribute to the soldiers fighting in the breakaway republic of Chechnya and asked delegates to stand in memory of their "heroes."

He signalled a switch in policy in the region away from purely a purely military tactic to a more social and economic route for stabilising relations.

"We should not make unjustified promises," he said.

"We must be responsible for protecting social and people's rights and solve economic issues which requires a professional approach and bravery on our part to prevent terrorism and results of crimes we are not able to prevent."

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The Government of the Russian Federation

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