Jan 30
AleksEconomy, Personal, Society
RIGA – In a memory of many middle-aged people here in Latvia, the times of the Prime Minister Ivars Godmanis are associated with the turbulent times of the 1990s. Back then, the tiny country won its independence from the Soviet Union and launched into the establishment of the political system that is in trouble today. The images of empty shelves as the one to the right are fresh on their mind. The photo, incidentally, was taken in 1987, part of the One Day in Latvia project.
Yet, we hope that the 1990s will not make a comeback. We hope that we won’t have to stand in line for basic necessities. At the same time though, it’s hard not to notice that it is beginning to smell like the 90s. The national office of statics today said the retail trade turnover shrunk by 4 percent in December, compared to the month before. Or almost 17 percent year-on-year. The prognosticators are predicting tough times for the once-robust economy, sending chills down my spine.
The numbers are abstract. Signs of economic changes are as real as stories of people who lost their jobs having no money for a simple 40-santimi bus ticket.
A few months ago, a hall that once was a gambling facility in our office building right across the river from the Old Town welcomed a new tenant. Written in the Wild West fashion, the sign told everyone that “Soon, a country music club will open here.” This sign is perhaps a metaphor how badly economy has turned since then. A few weeks later, part of the sign declaring that the club will be a country club has disappeared. Apparently the owners decided to open just a club across from where they’re building the new Castle of Light. The other day, the owners made another modification. Now the sign reads, “Soon will open.”
Signs of times continue to persist. In the last week, strangers asked me three times for some changes to buy a tram ticket. Usually, asking for a smoke, or some change is used as a way to get into a fight, but this time, those people seemed genuinely looking for some help.
Another tenant on our floor was moving out. A group of young men moved the office furniture from the fifth floor to a moving truck parked downstairs by the front door. Along with the office furniture, they also removed everything that they could find in our only bathroom – the toilet paper holder, the paper towels holder, basically anything but the sink and the toilet. Though one thinks if they had more time and less risk, they would have taken those too.
Jan 29
AleksBeyond Latvia, Economy, Revolutions, The Godmanis government
RIGA – You can’t help but compare Iceland with Latvia. There are shades of similarities between the two countries – social unrest, a government lacking in credibility. To quote an excellent Edward Hugh article: “The problem is that Latvia, apart from the internal credit boom, and the consequent housing bust and real economy contraction which follows (and which all three Baltic states “enjoyed” actually stands out from its Baltic peers in that it also became something of an offshore financial centre during the boom years. That is to say, there are shades of the Iceland or UK problem in the Latvian situation.”
The International Monetary Fund in its report issued four days before the unrest – their mission was leaving Latvia on the day of the riots – stated that a key to its program success is the wide political support. (PDF file)
Clear medium-term objectives, strong political leadership and mobilization of public support will be key. Consolidations tend to be more successful when perceived by markets and the population at large as durable and sustainable. In many European countries in the 1990s, consolidations were justified by the objective of the Euro adoption, which is also the case for Latvia. On the other hand, most consolidations tend to be led by new governments and under a broad consensus. Latvia’s Parliamentary elections in 2010 represent a risk.
Clearly, the Penguin Revolution and the subsequent ultimatum by the President to the parliament adds risks to the program. Success of this program depends on wide public support which this government doesn’t have.
The IMF required a wide parliamentary support before it agreed to the loan. This is why the Prime Minister Ivars Godmanis urged the parliament to adopt wide-range of painful cuts and raise taxes at the end of last year, asking opposition parties to come on board for the country’s sake. The January 13 protests and following riots turned it all around. And, I think Godmanis realizes that. He blames the opposition parties for staging a rally. And, I suspect, it is why he didn’t want to be seen along with an opposition leader Aigars Štokenbergs in televised public debates three weeks ago.
In traditional European parliamentary democracies by and large a wide parliamentary support equal a wide support of the population. However, in Latvia, it just means an approval of a certain elite clique that stands behind political forces represented in the 100-member incredible Saeima. The parliament isn’t popular, but according to Godmanis it’s the strongest in Europe. His center-right government, however, is the least popular government in Europe, with popularity of 10 percent. It raises risks to the IMF program.
When you have an unpopular government cutting wages, raising taxes, its rating will plummet down. And I suspect we haven’t seen the end of the popular unrest. The rock concert was just a prelude to a wider protest. Already, the farmers threaten to block highways and streets in Riga in protest against government policies next Tuesday, if their demands are not met. Providing information to a lot of villages, the national radio broadcaster doesn’t have enough funding to operate, adding to the frustration. People will be laid off with unemployment reaching up to 12 percent, basically double in the matter of months, according to official estimates. Unofficially, of course, it will be much higher.
While the IMF sees an election as a liability because it ushers in an uncertain future, for the people of Latvia an election under new updated election laws appears to be a way out of this crisis of political credibility amidst economic uncertainty.
The parliament speaker Gundars Daudze this morning offered more evidence that we’re heading for snap elections. He said in a TV interview that he sees no possibility to adopt constitutional changes before March 31, the presidential deadline.
The photo above was taken by me during the summer farmer protests against the EU milk quotas
Jan 27
AleksThe Godmanis government
RIGA – If Latvia were a civilized country, the government would have long collapsed following the Jan. 13 riots.
Jan 19
AleksPolitics
RIGA – In spite of the increased police presence in the Old Town, this weekend went without any incidents. Ricības Partija, or the Action Party, the former euro-skeptics, planned to stage a demo outside the presidential Castle, but their request for the demo was denied by the city government, citing security concerns. Sounding like something off pages of a comic book, the Action Party apparently resembles mostly pensioners, if one were to judge the membership from the prelude to the January 13 riots and demonstration. The Action Party started its protest much earlier that day near the 1905 revolution monument on the Embankment, then proceeded to the Cabinet of ministers and ended up at the demonstration on the Dome Square.
Either way, it was eerily peaceful in the Old Town this weekend.
The bad news is a news item by Leta:
RIGA, Jan 18 (LETA) – Having been tipped off by a person who overheard a conversation in a trolley-bus, Security Police have uncovered a group of persons planning more violence in Riga, as “LETA Video/TV 21″ was told by Interior Minister Mareks Seglins.
“I must express thanks to the person, who informed the police abut the conversation he overheard. The group had discussed where they would meet in order to organize more rioting. In checking out this place – what one could call a headquarters, a meeting on further action was being held,” Seglins informed. He underlined that the group has not been detained, but that the police “thwarted more possible disturbances.”
He did not mention how many exactly were involved or what they were planning.
“No details from me, I can’t tell you. This borders on a state secret, i.e. this criminal case’s fact are a state secret. I, as a politician, have no right to say anything,” he stated.
The little piece of news raises some question.
First of all, should one be careful what one says in a trolleybus for fear to be reported to the security police? Can one say, “the government has to be taken down?” Or does it constitute some kind of planning of an unconstitutional coup?
Second of all, surprisingly, no one has been arrest in the whole ordeal. Why not? If the tip was as good as Segliņš suggests, shouldn’t it follow by some arrest? I’d rather hear the minister of the interior say they’ve arrested a group of provocateurs who sought to undermine the constitutional order of the Republic of Latvia. But he didn’t. He said no one was arrested at the alleged headquarters, but future attacked were thwarted.
Jan 14
AleksAudio
RIGA – Probably the most encompassing interview I had last night at the protest.
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Jan 13
AleksParliament, Revolutions, The Godmanis government
RĪGA – Shattered glass. Blue paint on the building. Broken plastic bottles. Cobblestones. Ninety-eight detained.
These are the preliminary results of the aftermath of the penguin revolution (when Godmanis told the people in his New Year’s Eve address how penguins deal with severe winter – they huddle together to stay warm – the same way as Latvians ought to do when going through the economic turmoil).
But it started all so peaceful. Around 5 p.m. several hundred people had already flooded the Dom Square in the heart of the capital of Latvia. People of different ages, ethnicity, backgrounds appeared united in their disdain for the ruling coalition, and – more importantly – the culture of political cynicism.
Following the 90-minute event mostly young people moved toward the Saeima building. They tried to get in. Prevented from doing so by the riot police, they began throwing anything that they could lay their hands on – from snowballs to street cobblestones. The first flood windows were shattered.
Commentators undoubtedly will analyze what had taken place – whether the riot was a fruit of public discontent and anger at the ruling clique, or a product of alcohol and intoxication, or, perhaps, a combination of both. One thing for sure, regardless of the protest, the political cynicism lives on. The Interior Minister Mareks Segliņš, who was nowhere to be seen near the riots, sent an SMS to Aigars Štokenbergs, a party leader, who organized the protest, saying “Now you can be proud.”
Jan 13
AleksEconomy, The Godmanis government, Uncategorized
RĪGA – The Nordea macroeconomic review (available in PDF)in September put it rightly: “Latvia: the Party is over.” After several years of robust growth, Latvian economy is now in a slump. The economy is expected to shrink by as much as 8 percent this year, resulting in massive unemployment the likes of which we probably haven’t seen since the early 1990s.
Riding the populist wave a head of the local elections this summer, the minister of transport Ainars Šlesers – an apparent candidate for the mayoral seat in Rīga – yesterday proposed a three-year moratorium on allowing banks to go after defaulted borrowers. That means that banks will not be able to use all legal means necessary to get back the money they lend to consumers.
“There has come a time to call to answer the irresponsible behavior which banks have behaved in the recent years,” Šlesers told LNT.
It is an ironic statement coming from a man who appears to be above taking responsibility for his actions. Blaming banks for irresponsible borrowers is as foolish as blaming the sale of alcohol for the rampant alcoholism. The one and only Soviet President Mikhail Gorbachev fought alcoholism exactly the same way Šlesers proposes to fight the severe indebtedness: absolving people from their responsibility for their decisions. When will we learn to make the right choices?
The problem is people who have not been used to credit were exposed to vast possibilities. They took out loans to go on holidays. I heard stories of people taking a cruise to the Mediterranean on credit, buying the latest and greatest in clothes, automobiles, houses on credit. People have been living beyond their means and clearly have to learn the tough lessons of the crisis. It’s something that people teach their kids in the West.
That is not to say that the government should stand idle as voters struggle to make ends meet in an economy where unemployment is projected to reach 11 percent in 2010. Changes in bank regulation certainly are needed and will be coming our way this year. And it seems to me requiring people to take a class on financial management paid for by the bank before they’re granted a loan would educate the public how to manage their finances, and how to live a peaceful life no matter what might come your way. Even if it’s another economic turmoil.
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