Microincidents and social decay

I may be wrong, but often a "sense of what is going on" arises from a series of what could be called microincidents that point to a broader pattern of developments in society. Trend analysts often look at this as forerunners of something that may become significant (small groups of trendsetter teens dressing like, eating or doing X, Y or Z). I also think that microincidents can start to add up to a pattern of social degeneracy in Latvia.

Let me just name a few. In two drives to and from my summer house (finally closing up and wired with burglar alarms), I saw several instances of what I called "traffic wading" -- persons simply, blindly stepping into a street wherever the fancy strikes them, then standing more or less dumbstruck on the white line or just zombieshambling along, since cars do stop for pedestrians and other large objects on the road, even in Latvia. One woman I saw was standing and smoking on a busy road. Most of those I saw were not drunk (the 9 am stumblebums encountered as I walk to work no longer register). They were just somehow --detached.

Then there was the a middle-aged female undead with huge shopping bags who, in a very narrow (and badly designed) place in a cafe in the Alfa Centrs shopping mall, simply squeezed and pushed by us, not saying a word, not giving us a chance to step aside. I remarked to my wife something to the effect that " the bitch could have excused herself" loud enough for the woman to hear, but she simply moved on, zombiefaced and deaf (a Latvian language paper folded in one of her bags seemed to show that she understood the language). This was not the first such encounter, sometimes these robo-bābas (for all you Latvian readers) or robo-bitches (not an exact translation) bump past you at street crossings and other places where there is pedestrian congestion.

What I am saying is that as the better educated and more adventurous (of economic necessity) population emigrates, what is left is an increasingly behaviorally deviant, strange, lumpenized, often intoxicant dependent contingent responsible for an increasing number of microincidents that add up to an emerging sense that society is degenerating as the ranks of an economically deprived or outcast and psychologically damaged underclass seem to increase day by day.

This is not just me. A local Latvian woman who I work with from time to time, and who moves around roughly the same streets as I do also told me recently that she was freaking out from all the strange and bizarre people she was seeing. Is that as the Eloi leave, we see the Morlocks better?

Swedish paper pulls a mindf**k on the Latvian media

Sweden's Dagens Nyheter has pulled off a successful mindfuck on the Latvian media, thanks to me, actually. The paper ran what appeared to be a letter to the Swedish prime minister Fredrik Reinfelt (Moderate Party) from the leaders of his three coalition partners. It raised very credible points, including Finance Minister Anders Borg's scolding of Latvia for failing to cut 500 million LVL from its budget.
The letter was written in a very Swedish informal style -- Dear Fredrik, etc. and signed with first names. This made it even more believable that it was not a fake opinion article, but most likely a leaked letter. The signature of Peter Wolodarski, one of the editorial page writers, lent credibility to this version. OK, it was Sunday afternoon, I was not at the office, I was surfing the Swedish press, so I wrote it up. But it was not fucking April 1, when you are on the lookout for such stuff.
OK, the squareheads* got me on this one, gotta write a correction on the LETA wire....

*a bizarre name for Swedes I heard in an American cowboy movie, where one referred to a Swedish prarie settlement as a place "with nothin' but squareheads living there". :)

The strange death of liberal "Diena"

NOTE: Corrected the spelling of the British family to ROWLAND in a few places.

October 10 turned into a day of written and video/audio soundbites amounting to obituaries for Latvia's (once?) leading daily "liberal" newspaper Diena (The Day). It was no wonder, as the chief editor of the Diena media group, Nellija Ločmele, the editor-in-chief of Diena, Anita Brauna, the editor of the editorial and op-ed page, Pauls Raudseps and several senior reporters announced their resignations after it was disclosed that Diena (along with Dienas bizness, a business daily) had been sold to the British Rowland family.

The Rowlands are said to have financed the transaction when the Swedish Bonnier publishing group and agreed to convert their loan into shares in a mutual fund that became the owner of both Latvian media companies. However, there are contradictory reports as to whether this was the actual sequence of events.

The departing editors said they could not work together with the new managing director of the Diena publishing group, a former executive at the company who returned to engineer and execute the transfer of Diena and Dienas bizness from the Bonnier group to the new owners.

Founded as a government-owned but independent newspaper in 1990, while Latvia was still a Soviet republic, Diena was "liberal" in the classic sense of standing for individual rights, freedom, Western-style democracy and values.

In July, it was announced that the Swedish Bonnier publishing group, the owner of Diena and the business daily Dienas bizness (this blogger worked for Dienas bizness for 11 years) since the early 1990s, was selling both newspapers to a Luxembourg-based company owned by Aleksandrs Tralmaks, a former executive with Diena (some years earlier) and Kalle Norberg, an Estonian financier. The transaction was financed (temporarily) by undisclosed lenders as part of a scheme to set up a Luxembourg based media mutual fund.

The transaction, with so many unknowns, set off a frenzy of speculation, much of it verging on paranoid fantasies that Latvian oligarchs, Russian intelligence services and other evil powers bent on destroying Diena or using it to brainwash the population were actually behind the deal.

To be sure, the transaction was hasty, largely because the Bonnier group was eager to get rid of their Latvian assets as quickly as possibly, while keeping their business newspapers in Estonia and Lithuania. It was going to take Tralmaks and Norberg a few months to set up their mutual fund, longer than the Swedes were ready to wait. In a move that would later be one of several reasons for things unravelling as they have, Tralmaks and Norberg raised funds for the purchase from undisclosed lenders. Tralmaks said the real owners of Diena and Dienas bizness would be disclosed on October 1, but later delayed the announcement until October 9.

By then, three months of secrecy, contradictory hints (at one point, the transaction was said to be financed by some of the founders of Skype)and internal recriminations and arguments about future business strategy had taken their toll. There was, in all likelihood, an irreparable rift between the top editors and Tralmaks by mid-September, when rumors of Ločmele's and Brauna's resignations first appeared.

Tralmaks had proposed drastic cuts in production expenses for Diena of around 55 %, which would have led to considerable staff reductions and salary cuts. Diena's editors proposed a less painful solution (according to a blog Cita Diena/A Different Diena set up to communicate about the breakdown of the newspaper as run by them) and at one point even proposed a management buy-out of sorts. Ločmele jas told Latvian media she had found potential investors to buy back Diena from Tralmaks and Norberg, but was rebuffed. That move also sealed her fate -- it was seen as disloyal to the owners of the moment.

The situation at present is that everyone seems to be standing at a smashed trough (pie sasistas siles) to use a Latvian expression (sort of meaning that the instrument by which all of the barnyard creatures could have been fed has been foolishly destroyed). Tralmaks (now merely the CEO of the Diena group, with no ownership stake) has seen his brand value walk out the door -- indeed, he had some of the top editors escorted away by lawyers and security guards who first searched boxes and briefcases of "the departed" to see that no confidential company documents were taken.

"The Departed" have strongly hinted that they will start a new media outlet, most likely an internet portal and some kind of print publication, but with the Latvian economy collapsing, this is a daunting task, no less than the challenge of keeping the "old" Diena afloat, with Tralmaks speaking of drastic drops in advertising spending already at the time the deal was announced in July.

Finally, Jonathan Rowland, the Rowland family member apparently most involved with the investment in Latvia, has seen his admittedly risky investment turn -- very risky. Rowland appears to have been a bit of a high-roller in the past, so three years from now, he'll probably be at his club and hear something like "Good on you with that Shanghai deal, pity about that...where was it... Latvia or someplace? Odd isn't it, it was some Latvian lads who put the new roof on my country place. Great job. You know, Colin got burned for about as much on that Swedish game console thing...win some, lose some."

500 m or 8.5 % --have we a failure to communicate?

I have not been following the seemingly shambolic (tax this, no, tax that, no, tax nothing, axe nearly everything) development of the 2010 Latvian budget in great detail. But it now seems that the main problem with the international lenders (the European Union/EU, the International Monetary Fund/IMF, the Nordic countries, etc.) is that there appears to be no common definition of benchmarks. There is the absolute number of LVL 500 million (that's more than USD 1 billion for those who want it in "real money") and the other figure of an 8.5 % budget deficit as a proportion of Latvia's GDP.

One is a fixed figure, the other is changeable (not in nominal terms, but in the underlying factors). LVL 500 million is 500 million. 8.5 % is 8.5 % of a figure that has already fallen by 18 % and will probably fall again in 2010. What was USD 8.50 out of a hundred dollar bill isn't USD 8.50 out of USD 82 or maybe USD 70 further down the line.

So what is the crucial figure? In terms of keeping government borrowing down as a percentage of total GDP, it is the percentage that counts and all (most?) of the other figures adjust accordingly. This is one way that you can interpret the Latvian government's proposal to cut the budget in absolute figures by only LVL 225 million, or maybe LVL 275 million, or maybe LVL 335 million. Which is it? But forget that, the important thing is that one of the "whiches" is an amount that brings the budget deficit close to 8.5 % and, in a sum of spending cuts and revenue increases, actually adds up to, or has the same effect as 500 million. Got it?

Swedish finance minister Anders Borg didn't, nor perhaps did the EU. Borg was speaking on behalf of the EU when he chided Latvia for not cutting LVL 500 million straight up from state expenditures, punkt, slut! as the Swedes would say. But maybe the EU really didn't mean 500 million, whatever it takes, but rather, whatever gets Latvia to 8.5 % without effectively stopping the core functions of the state, including education, pensions and health care.

A long IMF country report dated August 7 but made public only a few days ago in early October doesn't paint a very hopeful picture of Latvia's ability to live up to the IMF's conditions. It uses words like "daunting", "challenging", etc., seeming to say between the lines that Latvia lacks the political will and administrative capacity to get its act together. It also hints that the country might have been better off devaluing the LVL early on, as the unbendingly strong lat is named as one of the "challenges" in several parts of the report. Anyway, to devalue at this point would merely worsen the effects of a very harsh internal devaluation (wage cuts of 30 % and more) and replace falling prices with import price inflation. If the LVL is floated, there is talk that it would be very volatile and fall between 30 and 50 %, maybe to recover close to its current theoretical but unused band of plus or minus 15% of the "fixed" rate against the euro.

With some non-Swedish foreign papers interpreting the story of Borg's alleged confidential talks with Swedish banks as "warning of Latvia's collapse", it is a wonder that there has not been any pressure on the LVL as yet (Oct 7). The Swedish Finance Minister is in the challenging position of having to speak for the EU (it is the Sweden presiding) when the EU position (500 million or 8.5 %) is a bit ambiguous, and of avoiding a situation where Latvia actually cracks and hundreds of billions of SEK (as loans by Swedish bank subsidiaries in EUR) are put at great risk or lost.

As the rather harsh dialogue between Latvia and "the Borg" (not the Star Trek hive mind, but the Swedish FM with his dual role) continues, it is obvious that the basic problem is a failure to formulate the issue, which Latvia has tried to belatedly do, arguing that it is meeting the 8.5% target and should not be beaten with the 500 million cudgel. But it may be too late, and Latvia has created an almost irrevocable image of being an unreliable, vacillating and politically disorganized partner for its international lenders.

The everyday Latvian Charlie Foxtrots* continue

Often it is not the high (low??) black comedy of Latvian politics that reminds one of how disfunctional some things are, but rather everyday occurences. Take, for example, two cases-- the bizarre waste of European Union funds in Carnikava, where my family has a summer cottage. Officially, there is a project funded by the EU Cohesion Fund to extent municipal water and sewerage to parts of the town, including some of the so-called summer cottage districts (land that was divided up for this purpose during the Soviet era and given, mainly, to people associated with the state hydrological and reclamation institutions, that is, engineers and technical staff who know something about water and sewerage systems).

As I noted in an earlier post (with video), "work" has been going on at a road crossing for several months, digging and refilling the same trench, moving and reburying pipes and culverts, keeping some kind of ancient-looking pumping machinery on site and basically totally or partly blocking access to whole communities. According to some of my summer neighbors, who know what they are talking about, the problem seems to be that whoever is doing the job cannot get one major sewer/water connection across a main road done right. Instead, the construction crew is conducting an endless series of experiments. This is not the Channel Tunnel, for f**k's sake! We are now getting close to the season when frosts and freezes are likely to ice up the water-filled trench and the mud-field surrounding it. What then? Where is the EU investigator demanding that these fuckwits explain the massive waste of funds (at least on a project level)?

Another daily WTF? is the pedestrian tunnel that has been dug, equipped and simply left empty, boarded up and fenced off at one of the busiest and nastiest crossings in Riga, between the Central Station and the Stockman/Forum Cinemas complex. There are pedestrian lights which seem to function in some random relationship to other traffic lights, leaving huge trolley-busses, busses and other traffic blocking the crosswalk or simply driving through the flow of pedestrians (this is Latvia, lights are merely suggestive). Partly to blame, apparently, is Finnish Stockmann, which promised to build a pedestrian tunnel at the same time as it built the department store and cinema multiplex, but one suspects that things may have been delayed for years because in this kind of public-private partnership, the "public" side had its hand out and the private side was expected to put something there before anything moved along.

Anyway, crossing to the department store and cinemas was a mess before any construction began, it was a worse mess while construction went on, and now little has changed while, for several weeks, there has been a finished tunnel (the workers are gone) boarded up on the Central Station side and fenced off on the Stockmann side. WTF??

There are reports in the media that the tunnel may actually open to pedestrians in the next couple of weeks, the reason for the delay being, again, as so often in Latvia, that some process has to unfuck itself over an agonizingly long time before anything happens. In this case, it is the formalities connected to delivering title to the tunnel from the builders (financed by Stockmann) to the municipality of Riga. Meanwhile, welcome to the Third World...?

*oh yes, the title contains a nice name for clusterfuck.

Valdis, Valdis, vad fan?!*

Vad fan?! (pronounced va' faahn) is a Swedish exclamation of surprise, anger and disgust in different proportions, depending on the context and connoting anything from " what the heck?" to "what the devil?" (almost literally) and even "what the fuck?!"

Vad fan?! probably sums up what Sweden's Finance Minister Anders Borg feels about the situation in Latvia, where his country's banks have billions of SEK at risk if the economy is not stabilized and some signs of recovery shown. Essential to stabilizing the Latvian budget are huge international lines of credit that have been and will be paid out only when conditions agreed upon with the international lenders -- the European Union (EU) and International Monetary Fund (IMF) are met.

So far Latvia has blatantly ignored the terms of its most recent letter of intent with the lenders and, instead of cutting LVL 500 million (more than USD 1 billion from the 2010 budget), it has cut only LVL 225 million. Pushed by the People's Party (Tautas Partija/TP) -- which signed the letter of intent promising to tax residential real estate-- Latvia has backed off from even considering some kind of tax on residential housing and expelled the only parliamentary deputy who suggested that the matter be put to a legislative vote even if the TP was against it.

Valdis Dombrovskis, Latvia's prime minister and head of a shaky coalition, now claims that "political agreement" has been reached on the less harsh 2010 budget that actually breaks with the terms of the letters of intent Latvia has signed with its creditors. In other words, there is a very good chance that Latvia will not get any more loans for the simple reason that it ignores the terms and conditions on which this money is provided.

Sweden's finance minister has understood as much and has let both Swedish banks and the media know -- directly and indirectly -- that Latvia is on its way to possible if not likely state bankruptcy and economic collapse (once there is no more money for the state budget). The Latvian government, or rather the TP, which lives on a planet of its own, is ignoring these warnings and dragging out its Alice-in-Wonderland budget process in front of the whole world (which is, unknown to the TP, the planet that they are really on).

Latvia has already established a solid reputation of unreliability and vacillation -- if not something worse, summed up by an expression that circulated after a city councillor (who was cooperating with the police) took a bribe and then didn't vote how he was bribed to vote. It is " paņēma un uzmeta" -- "took the money and fucked us." The TP and other Latvian politicians apparently believe that this way of doing things can be exported to the international arena without any consequences.

To be sure, the terms Latvia agreed to with the international lenders are incredibly harsh and leave no room for measures to stimulate the economy. As implemented by the government, the budget cuts hitherto seem to be destroying the state-funded health care system, wrecking education (teachers are paid barely above the minimum wage), demoralizing the police (with drastic salary cuts) and reducing pensioners to absolute poverty.

On the other hand, the international lenders, including the IMF, didn't fly in with a ready and non-negotiable set of requirements, more likely, with a number of goals and targets that they asked the Latvian side to make proposals for meeting and assuming that the Latvian government could actually execute on these proposals and compromises. From the outset, the EU and IMF lenders never excluded, for example, devaluation of the LVL instead of an extremely harsh "internal devaluation" by reducing wages. Latvia was unbending and chose a policy that, many would argue, has sharply cut living standards (prices of many domestic essentials would not have risen sharply if the LVL was devalued, certainly not with the same effect as a 40 % cut in income).

Instead of formulating a policy that met the needs of both sides and sticking to it, the Latvian government has engaged in a balagāns (a cheap clown show) of political in fighting and signaling the international lenders that now that you have filled the trough (with the loan tranches paid hitherto), the pigs will play with their food as they please.

Sweden's finance minister doesn't go out and (even in a confidential meeting) scare Sweden's already hypernervous banks with warnings that Latvia will collapse unless there is a lot of substance to such a forecast. It now looks like Anders Borg is probably right and Latvia's creditors must do as American children in the 1950s when the atomic air raid warning went off -- they have to duck and cover.