Moscow mayor attacks Kremlin's economic policy

By Oleg Shchedrov

MOSCOW (Reuters) - Moscow's mayor accused the Russian government on Tuesday of making the financial crisis worse with its economic policies, renewing a battle between economic liberals and rivals who favor a bigger state role.

Mayor Yuri Luzhkov made his comments in a newspaper interview published a day after President Dmitry Medvedev sacked four regional governors for poor crisis management in a sign of Kremlin nervousness about possible social unrest.

Medvedev warned regional leaders on Tuesday that more of them would lose their jobs if they failed to get to grips with an economic slowdown that has caused nearly two million lay-offs and dented faith in the Kremlin's economic management.

"The monetary policy of our authorities is one of the main reasons why we are now facing such grave problems in the real sector," Luzhkov, a veteran conservative, told Kommersant daily. "Monetarism should be abandoned."

Luzhkov singled out the policy, championed by Finance Minister Alexei Kudrin, of keeping billions of dollars from oil exports locked up in reserve funds.

The Kremlin's liberal camp -- backed by Medvedev -- has said the policy is necessary to prevent windfall oil revenues distorting the economy.

"This money did not help develop our economy," Luzhkov said. "We had zero (investment) in infrastructure projects, zero or very little at the best for ... the real economy. These are the reasons explaining our crisis."

Russia's economy is reeling from a sharp fall in the price of oil, its main export, and a liquidity crunch that has left many heavily indebted companies struggling to repay loans.

Data this week showed industrial output contracted by a fifth in January and wage arrears jumped nearly 50 percent in January, affecting about 500,000 people. About 1.8 million jobs have been lost since August.

POWER BASE

Luzhkov has a strong power base as mayor of Russia's capital but his comments appeared intended as self-defense after the Kremlin signaled it could remove more top officials.

Medvedev removed the governors of the Oryol, Pskov and Voronezh regions, and the Nenetsky autonomous district, on Monday in one of the biggest purges in years.

Analysts said the sackings were designed to show voters that the Kremlin was listening to their concerns about the effects of the slowdown on their livelihoods.

Speaking on Tuesday to senior members of the upper house of parliament, the Russian president said more dismissals would follow.

"In a situation where the crisis is growing rather than easing, an ability to work in new conditions, to work collectively with high levels of discipline is expected from the leaders of the Russian regions," Medvedev said.