So it's happened. The government of Prime Minister Mikhail Kasyanov has adopted the program drawn up by German Gref's Center for Strategic Development. A government meeting on June 28 officially approved the "main directions for long-term social and economic policy" and the "priority tasks for the government in 2000-2001."

Gref and his team had been fuelling the political rumor mill for several months. First, there was talk of the new authorities not being as liberally minded as they said they were and quite capable of choosing instead the program of Communist Yury Maslyukov – or a similar one drawn up by a group of academics headed by Dmitry Lvov.

Then came rumors of conflict between Gref and Kasyanov – Kasyanov wasn't sufficiently liberal, Gref was too academic, Kasyanov was simply jealous. But all this has been overturned. Maslyukov and the academics were indeed consulted when the program was still in its early stages, so that all the different ideas had been heard. And there never was any real conflict between Gref and Kasyanov.

On June 28, Kasyanov declared the government team to be unified and committed to liberal reforms. A good thing, because Russia will never have a deficit-free budget if it doesn't follow liberal principles.

But Gref's program did undergo some noticeable changes during the last intensive days of government discussion. It became shorter by half and also more restrained in its forecasts for economic growth through to 2010. The predicted annual increase in GDP is now 5 percent, rather than the previous 8-10 percent.

Politically, this prudence is logical, but it doesn't have any practical importance. It is difficult in any case to predict the future growth rate. The Soviet planned economy method measured government aims in quantity terms, whereas now, they are measured in terms of visible institutional transformation. Now that Gref's program has been approved, the main question is whether it will be possible to carry out the changes it calls for.

The government held discussions on this point, accounts of which say the issue was raised as to how realistic the central political idea of the program is – the development and implementation of a new social contract.

Though Russia has gone through a decade of reforms, the old paternalistic socialist contract between the state and its citizens is still largely in place. The state spends vast sums of money keeping afloat unprofitable and unnecessary enterprises, not for economic considerations, but for purely social reasons such as maintaining jobs and social infrastructure.

The state doesn't target the assistance it provides, but rather, gives benefits to whole categories of people. There are hundreds of these groups – 70 percent of the population is entitled to some benefit or other. But only a quarter of those receiving benefits are people who earn less than the living minimum. In trying to maintain this unnecessary burden of social expenses, the state is unable to keep up genuinely necessary social values like accessible and free education and health care. The pension system is also on the verge of collapse.

The idea behind Gref's program is that the state will now concentrate on these basic things. Budget spending on education is to increase next year. The government will gradually shift from a budget-funded pension system to a system based on pension funds. Some groups will also see their benefits get the ax, especially transport and housing benefits, and there will be a shift to targeted state assistance. The state will stop supporting unprofitable enterprises and do more to help create new jobs rather than maintain old jobs.

In his presentation to the government, Gref stressed this idea of a new social contract and it met with approval. The state doesn't really have any choice – the only question is whether to announce it all out loud, or just to get quietly on with it and do what's necessary.

But the problem is not one of announcements, the problem is whether Russia can accept and implement a new social contract. Are people ready to accept it? Are officials ready to carry it out? The public would accept reasonable ideas if the officials prove capable of explaining them reasonably, and more importantly, show themselves able to fulfill them. For the moment, the public suspects that when it comes to housing reform, for example, the only part of the reforms supposed to bring about greater social justice that will actually be carried out is the part involving rent increases.

Events outside the government seem to confirm these fears. The presidential apparatus was so keen to push through new laws restricting the powers of regional governors that it resorted to clumsy tactics in its zeal. Everything that could be done to rouse governors' suspicion and unite them against the reforms was done. The law that seemed sure to get through not so long before fell through. This – President Vladimir Putin's first real failure – can be rectified, but only if Putin's apparatus shows itself capable of learning from its mistakes.