Friday, May 01, 2009

Latvia: IMF! IMF? ...I'M F **KED??

The last day of April was a merry one for my one time journalist rival from Diena, Baiba Rulle, who broke a story that, according to  "unofficial sources", the International Monetary Fund (IMF) had agreed to let Latvia get away with a 7 % public sector budget deficit this year, retreating from earlier demands that the deficit be cut to 5 % or less.
The story appeared in Diena's internet portal -- the print rag (all due respect, that's journalist slang) carried a hockey (what else) story on page one. Within hours, the Minister of Finance, Einārs Repše, was 1) denying the Diena story and calling it journalistically irresponsible and 2) announcing that the budget, having cut most public services to ribbons and tatters, would have a deficit of 7 %.  What a coincidence!
As for 1) what journalist doesn't go over the top at one time or another or as Latvians say -- to whom does it not happen? (kuram negadās?). But 2) --without the sanction of the IMF-- is saying that the government will be bankrupt by the summer and all bets are off. In other words, woo-hoo, I'm driving the whole f**king economy over a cliff and flying back to my own planet!
UNLESS... Baiba's story is true, and our minister from the Red Planet did, in fact, get a very strong but possibly informal nod from the IMF that this time, we can get away with 7 %, get our billion (EUR?) from the IMF and keep the wolf away from the door for a few more months.
I think Baiba was right. I don't cover this stuff day to day, but some of my "channels" indicate that is what happened---the IMF, preferring to see a state collapse later rather than soon (I think the cuts needed for 7 % will destroy public services like medicine and education anyway, and hey, what did a police officer look like?) said to Repše -- go ahead, make a budget based on 7 % and assume we will look the other way and sign the check.
But that is not the end of the story, there is allegedly a bigger story, one that is not really a plan B, but follows from the " 7 % solution" which, (like Sherlock Holmes, was it, 7 % solution of cocaine, or am I wrong?) will only keep the collapsing state alert for a short time.
That is the one in which all bets are off, we do the d-word, print cash to make it through the night, and then maybe not pass Maastricht and go straight to Euroland.  Likely or unlikely??

1 comment:

Anonymous said...

What Latvia is no doubt hoping for is that her creditors will "forget" her debts. This is also true of Latvians on a personal and professional level. Having done a lot of business here, I know. I've had groups for whom I've saved massive amounts of cash on purchases and purchase recommendations, and in the end they expect someone else to step up and pay, or they pay a portion and hope the rest will be forgotten. Thus making a "profit", but also, by the way, burning a bridge.