Russian president urges missile deal to avoid new arms race

A Nato summit this month proposed an alliance missile-shield plan and invited Russia to join. Questions remain about possible command of any system..

Mr Medvedev said: "In the next 10 years, the following alternatives await us – either we reach agreement on missile defence and create a full joint cooperation mechanism, or, if we don't go into a constructive agreement, a new phase of the arms race will begin. And we will have to make a decision on deploying new means of attack."

He has already endorsed the Nato proposal. Experts from both sides are meeting before the end of the year to consider linking Nato's and Russia's separate systems to provide a shield against incoming missiles from rogue nations, and deliver a report to defence ministers in July.

Much of Mr Medvedev's 75-minute annual address to parliament focused on social and economic matters, with only comparatively brief and broad comments on political reforms and fighting corruption.

He urged MPs to make improving the lives of children Russia's top task and proposed giving free land to families with three or more children. The focus on encouraging larger families reflected serious concern over the demographic plunge that hit post-Soviet Russia. Because of high mortality rates and a declining birth rate, Russia's population shrank by seven million from its 1991 high. However, the country reported a small population increase last year, to 141.8 million.

"The 26 million children and adolescents living in our country should fully develop, grow up healthy and happy and become proper citizens - this is task No. 1 for all of us," Mr Medvedev said.

He proposed a series of measures to improve children's lives. He also suggested that families who give birth to a third child get a supplement of 3,000 roubles (60) a month and be given free land to build a home.

Opening the address, Mr Medvedev said Russia's budget deficit needs to be lowered if the country is to develop effectively, and said he aims to tame the inflation rate to four or five per cent in the next three years, from the current 7.4 per cent

Russia is running a budget deficit for only the second time in a decade. It stands at 2.1 per cent of GDP, but is expected to rise.