That is the situation now. In the future, it may be even worse. If Latvia fails to get additional foreign funding, it will essentially go bankrupt by the summer. There are few facts or economic indicators that speak against this.
However, it now seems that to tell things as they are is the real cause of the crisis in Latvia. Not the incompetence of previous governments (both here and in other countries, to be sure), not the failure to heed expert warnings. The crisis is caused by the media.
This was an opinion expressed by two PR and media relations people at a discussion recently hosted by the Latvian Institute on the topic "What do you say when there is nothing to say". It was a difficult topic, because from a journalist's viewpoint, there is something to say -- the facts (and what reputable sources say about them). From the PR standpoint, the view was that one had to say happy things, because saying depressing things was a sign of poor self-esteem and harmful to the country and its image.
Self-esteem is a good thing, but it was not the lack of self-esteem or lack of national pride that caused massive overborrowing. It was shortsighted arrogance that caused the government to adopt a "pedal to the metal" attitude on a burst of economic growth that was fueled largely by credit and a wild real-estate boom. These conclusions can be backed by facts and figures. Latvia's spiking inflation rate for part of last year was caused by the huge amount of credit-generated money in the economy outrunning the supply of goods, services and real property (so that prices rises would always be met by borrowed cash able to pay for them).
There are examples of success and competence in Latvia and I mentioned this in the panel discussion. I spoke of TiVi, the Latvian IP telephony and video streaming solutions company, about Sidrabe, the high tech surface coating technologies company. And I did not deny that Latvians were generally competent and intelligent people, as witnessed by the successes abroad (in Ireland and other countries where they have gone as labor migrants). Latvia's problem (one of its problems) has been corrupt and incompetent leadership, and the mission of journalist is to find and publish facts that expose this and other problems (and to speak of accomplishments, as well).
Now, as municipal elections approach in the middle of an economic crisis, the happy news spinners have started working again. Fine, it is their job. The media's job is different. Whether it is too late to change anything is still, maybe, an open question, although I think the chances are slim.