Latvian parliament stays on

President Valdis Zatlers spoke to the Latvian nation but failed to dismiss the Saeima (parliament) as he threatened to do unless legislation changing the constitution to allow dissolving the Saeima at the voters' initiative  and other legislation was passed by March 31.

Zatlers gave the "ultimatum" to the  100-member parliament on January 14, the day after a peaceful anti-government rally was followed by rioting. 

The president listed a series of measures taken by the Saeima hitherto that, as I read it, basically said that doing a two-thirds-assed (as opposed to half-assed) job was enough, together with the new government of fall-guy Valdis Dombrovskis, the economic crisis, the talks with the IMF, blah blah - was reason to give the Saeima another chance.

The reaction in internet comments has been pretty harsh. Many are calling Zatlers a wimp. 

My take -- dismissing the Saeima would have merely paved the way for a Chinese-fire-drill-at-monkey house style election. The People's Party (Tautas Partija) would probably have taken a bad hit, but populists, crazies and the politically inexperienced would probably have been elected in a hasty and desperate campaign, left with a nearly impossible task of forming a viable government.

At the same time, it is obvious that no election can prevent Latvia's rapid slide toward economic collapse and state bankruptcy.

Some positive angles possible?

So is there a way out of the present crisis in Latvia? The question came up at a reunion of sorts of the people who used to work for the Latvian Service of Radio Sweden. It has been 20 years since broadcasts in the Baltic languages were started, but they were discontinued a few years ago. The Baltic drama, as far as the Swedes were concerned, was over.
Actually, the seeds of another drama were being sowed in the 2004 to 2007 period -- a credit-fueled boom, the highest growth rate in the EU, salaries vastly outrunning productivity, astronomical real-estate prices. It was for my descriptions of the subsequent economic crisis in this blog that I got drawn into a rather intense discussion about why I was not “positive” about something.
Superficially, the discussion seemed to follow the same pattern as a panel discussion in Riga where I ended up against Eriks Stendzenieks, whose ad agency was hired to conduct a “positiveness” campaign ahead of the 2006 elections to the Saeima in Latvia and Viesturs Dule, an former TV entertainer turned media critic. However, my critic and opponent wasn’t a PR/media professional, but someone I have known in the Latvian community outside of Latvia for decades. She worked as a freelance contributor to the Latvian Service after I left in 1995 and moved (more or less) to Latvia.
As I said during the discussions in Latvia, the job of a journalist (and, by extension, of a blogger) is to present facts accurately. In blog it is not only permissible, but desirable to have a point of view, to exhibit attitude or opinion. But even that must be derived from the facts.
Anyway -- are there hard facts or statistics that indicate Latvia will avoid an economic collapse in a few months? Presently, not; things look pretty bad. Retail sales are seen plunging up to 30 %, foreign trade volume is down, unemployment rising rapidly and the number of job vacancies collapsing (this is not a creative destruction scenario where there is a lag between the “sunset” of one industrial sector and the creation of a new one).
OK, if I can’t be of a different mind based on present facts and figure, perhaps there are other ways to seek solace and to at least attempt to dodge the charges of doom-mongering that I heard the other night from my opponent in the informal discussion.
Perhaps one can turn to history. Hundreds of thousands of Latvians fled deep inside Russia during World War I, fearing the invading Germans. There was considerable war damage to Latvia’s infrastructiure and a large part of industry, linked to the Russian Empire, never recovered after the war. Nonetheless, the newly-founded country got back on its feet. Much of the recovery was driven by patriotism and the exhileration of building a new country.
Still further back in history, there were several times of devastating war and plague, all of which the Latvian nation somehow survived.
One could object that the period of post-1991 independence was followed by an incredible spectacle of corruption and incompetence, but certainly nothing that had not been seen and, in many cases, overcome in other times and places. So we can derive some hope or odds (in a probability sense) from this.
Another possibility is that predictions of a mass labor exodus as soon as Europe recovers could be exaggerated. A recent survey published in Diena, the Latvian national daily, found that 56.8 % of those questioned said they would not emigrate and 22.8 % said they had not thought of it, but might consider it. Only 3.9 % said they would definitely leave.
This poll addresses the issue raised by economist/blogger Edward Hugh, who foresees a worst-case scenario in which Europe recovers first and drains Latvia of skilled labor, leaving a nation of a shrinking second-rate workforce and a rising number of pensioners and other “consumers” of the social budget. That would leave Latvia as a stagnating backwater on the northeastern edge of Europe. Maybe it won’t happen.
It also cannot be excluded that another spontaneous mass movement, like the so-called Awakening of the late 1980s appears. There has been a false dawn in the so-called Umbrella Movement (after a antii-government rally in Riga in December, 2008 that took place in a rain and snow storm) and the so-called Penguin Movement is still to small to be considered a serious force. Nonetheless, nothing can be excluded, although future mass rallies are likely to be tainted with violence (after January 13). Still, the chance of a mass protest movement tinged with a threat of violence accomplishing some kind of political change can’t be excluded.
Yet another possibility is that the government of Valdis Dombrovskis regains the trust of the public and is able to enjoy genuine support. Certainly, Dombrovskis himself has a clean, if relatively short political record in Latvia. Maybe the population somehow suffers through the austerity without losing trust in the state. Sometimes miracles happen.

More than coincidence -- and a no-future scenario?

Recently I participated in public panel discussion of Latvia's international image, certainly the focus of bad news (see BBC's Newsnight series on collapsing Eastern Europe). When it ended, the person sitting next to me, a Latvian academic married to a foreigner, announced that she was moving to her husband's European home country. "I have two children," she said, adding that her doctoral studies in the other country would be less expensive than in Latvia.

Today flying to Stockholm, I stood near two Latvian women and a little girl (the younger woman's child) waiting to board my Ryanair flight. We got to talking, and it turns out they were both leaving to work as caregivers for triplets born to a Swiss woman running a hotel in Grenoble. The somewhat older women ended up sitting next to me on the plane and told me she had lived and worked in the US for seven years, then come back to Latvia in 2006. 

"I discovered no one needs me and my excellent English or any other skills," she said of her decision to move away from Latvia. 

Is this all coincidence or are more and more educated, skilled people leaving despite high unemployment in other European countries? We shall see.

One thing is clear -- if you have kids in the Latvian public education system, it is now time to consider private school  if you can afford it, or to emigrate. With the budget cuts proposed for education (both elementary, secondary and higher), it is likely that the quality of education will plummet based on attrition of teachers. It is not outrageous to say that public education in the country will start to disintegrate over the next two years.

At the same time, wage cuts of up to 40 % for the police mean there will be a severe decline in public security, a rise in bribe-taking opportunities and probable attrition of the police force to levels where it will barely be able to investigate crimes and keep public order.

All of this could have been mitigated by different, more cautious economic policies in the past three years. These opportunities were missed by previous governments, and there is nothing the present government can do to undo these mistakes. The government of Valdis Dombrovskis will preside, in all likelihood, over the nearly complete collapse of the Latvian economy.

Clinical death, devaluation rumors and stimulus

Latvia's Minister of Economics Artis Kampars (New Era/Jaunais Laiks/JL) has declared the Latvian economy clinically dead in a newspaper interview.
The new minister said that the present government under Prime Minister Valdis Dombrovskis (also JL) could not be blamed for the situation it inherited.
I have written previously that Dombrovskis is very clearly a "fall guy". By his remarks, Kampars has confirmed that the economy has collapsed/will continue to collapse on his watch. It doesn't mitigate things to say that JL warned of the impending economic crisis. The party decided to take the wheel of the state when it was well beyond any braking distance from the edge of the cliff.
Meanwhile, the PM has stirred new devaluation rumors by saying that the international lenders were divided on whether Latvia's strong lat should be decoupled from the euro. He said that the International Monetary Fund (IMF) didn't object to devaluation, but accepted that Latvia didn't intend to devalue. Meanwhile Dombrovskis indicated that the European Union (EU), also a major lender, didn't think devaluation was a good idea.
Bank of Latvia President Ilmārs Rimšēvics has urged the government to stimulate the economy. One wonders with what? Kampars said that while bureaucratic procedures to use EU and government money for improving the insulation of residences would take a long while, he expected some activity in this area in the summer (before funds are available?). Well, we will see who is running around with rolls of insulating material in June...
Rimšēvics also thinks that Latvia will be eligible to join the euro zone in 2012. It might just meet some of the inflation criteria (but don't count on it), but certainly not the national debt requirements. Think 2020 if we are lucky.
I say: worst case scenario devaluation by June (fuck you very much, Latvian Security Police), 20% unemployment soon, massive labor emigration by spring 2010 if Europe starts turning around. The first to go to well-paid cleaning jobs will be Latvia's teachers. Watch for a collapse of the education system in 2010 and 2011 as opportunities appear to GTFOFL*.

*get the fuck out of Latvia, what did you think?

Little hope to bend the IMF

Although Finance Minister Einārs Repše has spoken of a successful start to Latvia's talks with a delegation from the International Monetary Fund (IMF), these talks will mainly focus on technical matters, agreement on accounting procedures and budget methodologies. It is difficult to imagine that there would be any serious problems with agreement on "how to count the beans".

The fundamental problem is "do we get any more beans" and that depends on cutting the budget deficit to 5 % of GDP, not the 7 % that the Latvian government thinks it can cajole from the IMF. Whatever sympathies the IMF may feel for Latvia's situation (harsh public sector wage cuts of 20 % or even more), the international agency basically has its hands tied by a number of factors. One is that other East European countries (Romania is the latest) may be seeking loans, and easing Latvia's terms would set a bad precedent. The precedent could also carry over into other countries outside of Europe. Unfair though it is, the IMF is unlikely to accept the argument that other, bigger European countries are pushing the envelope beyond the 5 % limit, nevermind the US.

So it appears that Latvia's budget cuts fall far short of what the IMF demands in order to continue paying out its line of credit to Latvia, and the government will have to cut spending to beyond the bone or risk government insolvency by the summer. Those deeper cuts may well have close to the same effect as insolvency, as public services could be reduced to the point of collapse at the same time as pensions may be reduced, something that could be the last straw before new social disorders (taking to the streets by the unemployed or by youths tossing paving stones on behalf of their grandparents).

One knowledgeable source I encountered by chance recently  says that the IMF might cut a deal with the Latvian government in return for a devaluation of the lat, something the IMF brought up in its initial talks with Latvia late last year, but which the government rejected and its position was respected by the IMF. However, being allowed to boost the budget deficit to, say 6 % of GDP in return for letting the lat float in a 15 % range from its current peg wouldn't solve very much. The thousands of mortgage paying (in EUR) public employees would, in addition to their 20 % pay cut, see a rise of as much as 15 % in their monthly payments. Eventually, the devaluation would also boost input prices for domestic goods (energy, raw materials) and sharply increase the price of imports, including many essentials (wintertime fruits and vegetables) for which there is no domestic substitute, not to mention fuel prices.

Faced with these two impossible choices, Prime Minister Valdis Dombrovskis, in my mind, still stands as " the fall guy" for the previous (mis)governments. Perhaps this is meant as a final death stab to the reformist New Era (Jaunais Laiks) party, which had already done a fairly good job of slouching toward its own grave after splitting and losing some of its people to the new Civil Union (Pilsoniskā Savienība). The reason for this --bizarre and irrational as it may seem -- is to protect, at almost any price,  the current ruling elite (elites?) from serious challenge by a political force that at least to a large extent believes in clean, efficient governance.

Can Latvia's "golden age" be repeated?

There is an interesting blog post by a former commentator for the daily Diena, currently an economic analyst with Swedbank, Pēteris Strautiņš. He says that Latvia's post independence "golden years" were 2000 to 2004, when the country experienced balanced GDP growth of 6 - 8%, including steady growth of manufacturing. The post, in Latvian, can be read here.

The trouble, Strautiņš writes, started in 2005 as manufacturing growth stagnated and continued in 2006 and 2007, as the credit-fed boom took off (with double-digit growth). The Swedbank analyst believes there is a chance to restore balance and go back to the kind of economic growth seen in the "golden years".

Against this view stands the prediction by economics blogger Edward Hugh that Latvia could (will?) face a worst-case scenario where the economies of Europe undergo a "V" shaped recession (sharp drop, short time at the bottom, sharp rise), but Latvia goes into a "U" shaped recession. What this means is that Latvia experiences a sharp drop, stays "down" for a time, and then picks up again. But with much of the rest of the EU ahead of Latvia, the earlier recovery there will simply siphon off migrant workers from Latvia and the other "late recovery" economies.

To be sure, there will be harsh competition for these jobs, but Latvian migrants have a generally good reputation in places such as Ireland and the UK, perhaps Germany. So as Europe recovers and Latvia stagnates, as many as several tens of thousands of younger, educated or otherwise skilled workers could leave the country.

Experience hitherto shows that there are little or no incentives for Latvians in the  so-called "second emigration" to return. The "first emigration" -- my parents' generation, fled from the Soviet occupation. Their goal was to restore an independent Latvia. Emigration 2.0 are people -- I believe-- choosing not only higher wages and better economic conditions, but also better governance in their adopted countries and workplaces.  A significant signal was that even in 2006, as the boom in Latvia was taking off, only a few hundred of the tens of thousands of Latvians in Ireland (also then a booming economy) voted in the Latvian national elections. These people had turned their backs on Latvia as a political entity. Economically, they repatriated (and still repatriate) lots of money, and with Ryanair, are able to maintain family and essential social contacts with Latvia, but they have given up on being fully/politically part of Latvian society. 

If Edward Hugh's scenario plays out, then the number of emigration 2.0 Latvians will increase, the number of potential taxpayers in Latvia will fall, and the  "U" shaped recession could turn into an "L" shaped indefinite stagnation with a dwindling and less productive (the most productive having emigrated) labor force supporting an increasing number of "transfer consumers" (pensioners, the sick, children, the disabled and permanently unemployed). 

Maybe Strautiņš is right. But the second "golden age" may only come sometime in the mid-2010s, which is too late for anyone who sees quicker opportunities elsewhere and, like very many Latvians, deeply mistrusts the "system" in this country. That mistrust (a rational and experience based mistrust, I might add) is probably the most lethal of "poisons" circulating in the national bloodstream. 

I am of an age where recovery in 2015 or 2018 will technically have me out of the labor force. But people who are younger, in their 40s,  could hang on but for what amounts to the plundering of their future pensions by the present government, which has cut drastically contributions to the so-called second level pension funds. It is easy to calculate that this generation will have much lower pensions, so why not switch to a system that is more reliable-- Ireland, Sweden, take your pick. Also, there have been proposals to force these pension funds to invest in Latvia only, therefore depriving the fund beneficiaries of better returns on their pension capital in other markets and countries.

Yet another signal to thousands of Latvians that it is time to pack up and leave. 

Blaming the media for the facts

Latvia is spiraling downwards. The government thinks GDP will fall over 12 % this year. Swedbank is said to forecast a 15 % drop. There are no signs that the International Monetary Fund (IMF) or the European Union (EU) will accept the government's proposal to allow a budget deficit larger than the one specified in the agreement with the IMF. That means cutting not 280 million LVL from the budget, but 700 million LVL. That, in turn, means cutting social services and other essentials, probably even reducing pensions. That, in turn, may lead to social unrest.

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. 

Billions in debt service well into the 2010s?

If anyone has any illusions about a recovery of the Latvian economy in the foreseeable future,  they should check out some figures obtained from the State Treasury (Valsts Kase) by a researcher for the popular TV discussion show Kas notiek Latvijā? (What is happening in Latvia?). The Latvian version is here. 

Without getting into a whole muddle of numbers, by 2014, even based on current state borrowing (and, as I understand it, excluding the 7.5 billion EUR the government has obtained from the IMF and the EU), Latvia will be paying at least 1 billion LVL per annum in credit servicing (interest and repayment of principle) costs. Adding in the foreign credits, these payments will be almost 10 billion LVL up to and including 2020.

With economic growth stagnating for any number of reasons -- higher taxes, poor productivity, corruption, confused and clueless policies -- the debt load will probably prevent Latvia from joining the euro zone (you must have government debt below 50 % of GDP) in the foreseeable future. At some point, too, the lat will have to be decoupled from its 1 % corridor against the euro. although with such a huge euro debt, a devaluation will have an even more devastating effect on the ability of the country to repay its international borrowing (as well as on all domestic and household borrowing in EUR).

Add to this the fact that it appears Latvia will not even get its next payment from international lenders, since the new Dombrovskis government has agreed to only less than 300 million LVL of the 700 million LVL budget cuts required by the lenders as a precondition to continued payouts. It is very unlikely that the EU and IMF will cut Latvia any slack on this, and the 700 million cut will probably end up reducing public services below some critical minimum. That is not to say that Latvian government could not be run much, much more efficiently, but there has been too little effort (none practically) to think in terms of smart government and of a very careful prioritizing of cost cuts.

Quite the opposite-- a recent story  (in Latvian) on the State Audit examination of the huge cost overruns on the so-called Southern Bridge in Riga, boosting its cost from an initial just over 108 million LVL to 570 million LVL. That is the kind of money that India is spending on its next Vikrant class aircraft carrier. Of this cost to the municipality of Riga, 264 million lats (or some 0.87 santims for every lat spend on actually building the bridge) constitute debt service (cost of borrowing). Indeed, the entire project is one gigantic clusterfuck of cost overruns and waste probably repeated on a smaller scale in the way other municipalities and government institutions do business. Indeed, one figure of 27 million LVL pissed away by the idiot city fathers amounts to the money scraped together recently for support to dairy farmers. This bridge boondoggle will also have to be paid off, along with the debt servicing mentioned above.

The bridge story fits in well here, because it is a story of how money is misspent through Latvia's third-world rathole level of corruption, incompetence and idiocy in government. The idea of lending Latvia some 7.5 billion EUR is that it will keep the institutions of governance funded so that the economy can start recovery (maybe not even drawing down the credit line in full).  However, 7.5 billion is also the largest embezzlement, waste and corrupt diversion of funds opportunity ever presented to Latvia's ruling elite. Looking at how this country builds bridges for the price of an aircraft carrier, and how it wasted the so-called G-24 loan of a few tens of millions, of how it cluelessly beggared itself rather than saving its tax surpluses as warnings of an economic downturn multiplied, it is likely--bordering on certain-- that the EU and IMF funds will also be wasted and decimated by corruption and mismanagement.

New crew on the bridge of the Titanic

The government put together by Valdis Dombrovskis of the New Era (Jaunais Laiks/JL) has been affirmed by a large majority of the Saeima (parliament). It has published a declaration of policy that can only be described as a long list of largely commendable and reasonable tasks, for which no funding exists. Indeed, the fatal error of the present government is that it has proposed (including a 20 % pay cut for all public employees except in health care) budget reductions that fall far short of the 700 million LVL that must be reduced in order to narrow the budget deficit to the limits required by the International Monetary Fund (IMF) and the European Commission. Hopes of negotiating an exception are illusory -- the wealthier and older EU member states are already spooked by the possible bill for the present stage of bailing out Eastern Europe (see a recent issue of The Economist with a cover story on this).

Unfortunately, the Dombrovskis government is but a crew change on the bridge of the sharply listing Titanic. If the full 700 million LVL cuts are made, public services as presently organized and delivered in Latvia (efficiency and productivity, of course, have been alien concepts) will disintegrate. There will be strikes by schoolteachers as well as labor market actions by police. If Edward Hugh's prediction of a V-shaped recession for "Old Europe" and a U-shaped recession for Latvia comes true, it means that as soon as recovery starts in Western Europe,  labor emigration will pick up. Teachers and police whose standard of living was drastically reduced will seek unskilled and semi-skilled work abroad, because the pay will significantly exceed anything they can hope to make in Latvia.

However, before that happens, there will probably be significant social unrest and disintegration -- more street disorders -- police trying to control mobs of  "there but for luck, go I" unemployed and desperate demonstrators and rioters, increased street crime and massive "economic crime" as entrepreneurs simply drop out of the "legitimate" economy and pay their remaining productive employees in envelopes.

None of this can be avoided because it is the result of governments prior to Dombrovskis'  merrily crashing into the iceberg and fatally damaging the Latvian ship of state and society. This government, it almost seems, was lured into being at the helm for the final stage of the sinking. Historians will blame earlier governments, to be sure, but the record will show that when the Latvian state was bankrupted, when the lat had to finally be devalued, and when unemployment (later emigration) soared into double-digit amounts, it was Valdis Dombrovskis and his team who were formally in charge. 

Losing millions, but keeping faith in NGOs?

This is just a brief note about a talk on the European Movement in Latvia, an NGO (Non-Governmental Organization). Andris Gobiņš, the young, German-born Latvian head of the organization (therefore also a former exile community member) mentioned how several million (EUR or LVL) in European Union (EU) funds had been blocked or hindered from distribution in Latvia. It seems that the Latvian authorities told applicants that they could not request or spend money for accounting and administrative costs related to any EU funds they would get.

This, it turned out, was untrue, as Gobiņš found out simply by calling the appropriate EU officials in Brussels. This means that Latvian officials in charge of EU funds distribution and/or informing applicants were either ignorant or willfully lying. The liar and/or ignorant moron was a named official of the Latvian Ministry of Economics.

This, it seems, is typical of the way things are done almost 18 years after this country regained its independence. Many of those seeking to improve their business conditions or lives with EU funding lack the language skills and self-confidence to pick up the phone to Brussels (even though there are hundreds of Latvians there, working for European institutions and most not in collusion with corrupt, ignorant or lying Latvian government officials). Good that Gobiņš found out the truth on at least one issue.

However, this really doesn't change the overall picture of a state apparatus(that which persists when governments change) and a series of governments that have been overeager to adapt, apply and even invent EU rules and standards, then to be ignorant (out of incompetance or corruption) of what the EU really wants. This is just one example.

Both Gobiņš and Rasma Kārkliņa (a German-Latvian political scientist who spent a long time in the US) believe that the increasing activity of NGOs is a good sign. Kārkliņa published an article in the daily Diena and its website to this effect. Certainly, there is some support in statistics over the past few years for this assumption. But I don't believe that the political elite, which has been little influenced by the activities of society over the past 17 years, is going to suddenly change, get smarter, stop lying.

As I said during the discussion following Gobinš informal talk, the only thing that briefly gets the attention of Latvian politicians is a paving stone breaking a window. Not a way to effect real change considering the historical evidence of unintended and disastrous consequences for riots, uprisings (remember 1905) and revolutions. 

Unfortunately, it appears that more street disorders are inevitable as the warm weather approaches and the country spirals down toward state bankruptcy and societal cluelessness despite the uptick in NGO activities.

Patching together a government drags on

The formation of a new government under Valdis Dombrovskis (New Era/Jaunais Laiks) is being dragged out by political horse-trading even as the Prime Minister designate's own deadline for state bankruptcy (April or a little later) draws closer.

Until a viable or semi-viable coalition is formed, it is unlikely that the parliament (Saeima) will take any action on further budget cuts. The International Monetary Fund (IMF) cannot negotiate with anyone until a government is in place even if it was ready to change its terms of lending to Latvia (It has  been suggested that a larger budget deficit could be allowed to reduce the impact of further spending cuts on employment, etc.)

What is happening, however, is not surprising. The country and the political culture (post-1991) have no sense of solidarity in a crisis, politics "as usual" can continue no matter what is going on in the economy. Indeed, last-minute questionable deals can be signed by the outgoing government to build out Riga Airport with a Turkish company that has never worked in the European Union (EU). This is not to say that Turkish firms don't have a good reputation in areas such as heavy construction. It is simply that some of the other companies in the tender apparently were not convinced that the expansion of the airport should be as fast as the outgoing Minister of Transport  Ainārs Šlesers envisions it.  Some of them appear to have included this professional advice in their bid -- in other words, willing to do the job on realistic terms and not allow the customer to overspend and overdevelop.

It now appears that if and when a new government is patched together, it will likely carry on the earlier coalition traditions of somehow cluelessly muddling along (or earlier racing with the pedal to the floor, but not this time around) and trying to keep itself from falling apart by balancing party interests that may have little or nothing to do with a national interest. In fact, it seems that this concept, except as political rhetoric, doesn't really exist in Latvia and probably won't for the foreseeable future.

The mentality problem

In 2000, I wrote a rant called Transition Society Fatigue and A Crisis of Post-National Identity. I won't repost the whole thing, just some of the observations I made then, almost 9 years ago. The bit about post-national was a musing on what to do with one's exile Latvian identity when you start to doubt whether you want to identify with Latvia as it turned out:

LATVIA: ANNO 2000

OK, the first few years, you can make allowances for. But after a while, the sleazy, incompetent, inferiority-complex-blossomed-into-arrogant know-nothing style of running things, at least at the governmental level, becomes tiresome and damned irritating. The ignorance, drunken helplessness, sullen passivity and psychological squalor of a substantial part of the population do not exactly brighten the “civil society” side of things, either. Many of those who have made money use TV reruns of “Dallas” as a literal guide for spending it and as a handbook in business ethics. Underneath the facade, Latvia is too often a pretty sordid and sorry sight.
What the governing institutions lack in corruption they often make up for in ineptitude. Once some aspect of Latvian administration manages to avoid both, it is forced into some new form of bizarre behavior by the legislative Goon Show that is called the Saeima. The revised Child Protection Law that practically denied the children of single parents or divorcees the right to travel is but one example. Another case in point is the requirement that all vehicles owned by legal entities (as opposed to physical persons) can only be operated with a notarized power of attorney. This means that there will be hundreds of thousands of lats of business generated for the country’s secret special interest group – notaries public – from the pockets of trucking companies, other companies with fleets of service cars, and anyone who has bought a car on a leasing arrangement and left title to the vehicle with a bank.
These may sound like petty matters, but it is the massive level of petty, seemingly incurable stupidity that makes Latvia in 2000 a demoralizing place.

I am afraid that things are little changed 9 years later. On the streets, even before the economic downturn, one could see that the intractable underclass was still around, perhaps even gaining relative weight now that Latvia has been in the European Union for almost five years and it is very easy to move to live and work in another EU country.

One still sees the disturbing presence of able bodied beggars and young, dissipate, purposeless men (the new, perhaps racist term urla/as it is mostly applied to Russians, though there are plenty of Latvians who fill the bill/ comes to mind). The whole society, it seems, is sprinkled liberally with urlas.

In my earlier essay, I also used the American slang term mutt, which is broader than urla, as it can apply to ruling elite as well as to street people and marginalized groups.

Back in 2000, I wrote:

I often feel a strange familiarity in much of the street level behavior I have seen in Riga. People casually and carelessly strolling or staggering into traffic, hanging on street corners, lounging or sauntering in parks, the ever-present beer bottle in hand, the totally shameless intrusions into strangers’ personal space in queues and other crowded situations, and so on. Then I realized – these were the same behaviors and vibes one gets in a depressed black ghetto. This is Harlem or South Bronx street life-- Baltic style, and fortunately, without the Uzis.

There have only been subtle changes. The intrusions into personal space, as I remember, were from older, often blank-faced women, and in the intervening years, this particular subgroup may well have simply died off. Then again, I no longer ride public transportation on a daily basis, where this behavior was the norm when waiting in a small crowd (not a queue) for a tram or trolley bus. I have been able to walk to work for the past six years or so. The staggering into traffic-- I saw two urlas nearly taken out near the Central Station, at least one of them shit-faced in some multi-intoxicant haze.

Now that Latvia is facing its first really devastating economic downturn, what I wrote about social problems earlier seems more relevant than ever:

My guess is that around 30 % of the population of Latvia is “ghettoized” and probably beyond redemption, quite sullenly content to live in a haze of semi-ignorance, wounded pride interlaced with an inferiority complex, self-pity and passive resignation occasionally obliterated by alcohol or solvent abuse. For any society, there is a critical mass of degeneracy at which the society self-destructs or spirals into a long, agonizing stagnation characteristic, perhaps, of Third World tribes subjected to intolerable culture shocks. I am not sure that Latvia has reached this critical mass, but I have a feeling that it is dangerously close to it.

I have nothing to add. The feeling is the same. The country had 18 years, for fuck's sake! In that same time span, the US moved from the Man in the Grey Flannel Suit of 1950 to the counterculture and student revolt of 1968. The world now moves even faster and Latvia is simply letting itself be left behind road kill on the ever higher speed limit highway of history.

And I also can repeat and endorse what I wrote in 2000:

I expected a renewed Latvia and Latvians to move much faster, not necessarily in unison, but in close step (not deliberately tripping each other), toward self-evident goals like efficient government and markets, an open and fair society, and rapid, intelligent adaptation (not blind mimicry) of Western methods, values and institutions that, in the 50 year contest that was the Cold War, proved incontestably superior. I did not expect the muddle, the corruption, the ignorance that makes Latvia a psychologically often uncomfortable and disconcerting place.

Right man(?) too late

Imagine that someone had stepped up to the bridge of the Titanic, relieved the captain and said: "The biggest mistake on this voyage was setting out with too few lifeboats and it was wrong not to sail south of these icebergs, as we just bumped one."
The next thing the replacement captain says is : "Of course, as things are now, we will sink and more than half the passengers will drown."
That is about how I see the nomination of the New Era (Jaunais Laiks/JL) Europarliamentarian Valdis Dombrovskis to form a new government.
Dombrovskis, 37, is a pretty smart guy (degrees in engineering and economics, including both education and research work abroad in the US and Germany) and probably honest and straightforward. That is why he said that one of the first tasks of his new government would be to reduce spending(i.e. the budget deficit) by 700 million LVL in order to comply with International Monetary Fund (IMF) terms for its loans to Latvia.
The Prime Minister designees statement comes on the heels of a report that Latvia's so-called social budget will have a shortfall of 300 million LVL. Unless Dombrovskis has added this into his figure (and Latvia has separated the "social budget"which is funded by social taxes on payrolls from the "state budget"), it looks like the country will be at least 1 billion LVL in the hole this year.
If the budget deficit is not cut by 700 million LVL, the country will essentially be bankrupt, Dombrovskis said. Although he called cutting pensions a "red line" that his government will not cross, the possibility has apparently been brought up by the IMF. Pot banging little old ladies in the streets -- thousands perhaps-- anyone? Or how about real wild in the streets riots with kids throwing stones and burning cars in support of their grannies?
In order for Dombrovskis to form a government, he will need the support of the largest parliamentary party, the People's Party(Tautas Partija/TP) plus a few other parties. In other words, most of the Ugly Humpty Dumpty that presided over the complete clusterf**k of the Latvian economy will have to be put back together again. That does not bode well, but probably there is no alternative.
JL also doesn't have a spectacular record. Formed as a clean government, new approach party that ran in the 2002 elections and won big support, it almost immediately stumbled when Prime Minister Einārs Repše appointed a Minister of Health, Āris Auders, who proved to be a double-dipping sleaze bag who had done state financed orthopedic operations while taking big-time tips in envelopes from his patients (for "his golden hands".) The new government in 2002 also sharply raised ministerial salaries without having done very much (in was only in office a few weeks).
Repše as PM also came across as more than flakey, with a penchant for odd-ball, home made light aircraft, a series of wacko investments with loads of (borrowed?) money and business ventures with one of his series of girlfriends (a 500 000 LVL yacht that would repay itself from rich charter customers sailing the smooth sunny waters of the Baltic -- well, not in February, nor eight or nine other months). Some of these ventures came after Repše was forced from office, but they reflect on his judgement and strangeness. It is rumored Dombrovskis wants him as Minister of Finance.
In addition, JL is a weakened party, with some of its leading members splitting off to form the Civic Union (Pilsoniskā Savienība/PS). Parts of the hatchet that was used for the chopping are still protruding above ground, rather badly buried out of the necessity of the present economic crisis.
Unfortunately, it appears will will, instead of the idiots running the country up t0 now, a non-idiot who can do almost nothing to prevent the inevitable consequences of his predecessor's actions. The captain of the Titanic, perhaps the last man to sign off on the log-book of the ship, can be formally held responsible for the sinking. Now the TP has passed the log book to Dombrovskis and the JL, so they can sign before the waves close over their heads. Smart move??

Why Failed State Latvia?

I have changed the name of this blog to Failed State Latvia? from its earlier title of Thoughts from Latvia in an attempt to bring it back to life and up to date. Instead of some rambling and very infrequent observations about what is happening here, I hope to chronicle what I am beginning to see as the failure to launch of Latvia’s almost 18 year old experiment with independence.
My thesis is that Latvia has become a failed state lite. It is nothing like Somalia or Zimbabwe, the infrastructure functions, the trains run, there is 24/7 electricity, telecommunications, internet, food, water, heat (unless the bills have not been paid).
The problem is political and societal, and, of late, economic along with the rest of the world. The Latvian ruling political elite has reduced its level of public support to single figures. The four-party coalition government of Ivars Godmanis has fallen, and the People’ s Party (Tautas Partija/TP) is desperately trying, with it 1.6 % rating, to form the core of the new government. The New Era (Jaunais Laiks/JL) is pushing its bright young Europarliamentarian Valdis Dombrovskis for Prime Minister.
The last time around, the JL failed to change much in Latvia’s corrupt-to-the-core political system. JL’ s founding leader, Einars Repše, bungled his chance to at least start some process of change back in 2002 and his only success was to get Latvia into the European Union (EU). JL split with some of its other charismatic figures (among them, Sandra Kalniete, the Iron Lady of the Popular Front/Tautas Fronte) went off to form a new party, the Civic Union (Pilsoniskā Savienība/PS). TP lost some of its members including ex-Foreign Minister Artis Pabriks and ex-Minister of Economics Aigars Stokenbergs who formed the party Society for Different Politics (Sabiedrība Citai Politika/SCP).
The so-called opposition is split, public cynicism about politics is at an all time high, and the economy has been let go so far that there are almost no options left. The official forecast is for a 12 % drop in GDP this year, I would guess 15 - 18 % is more likely. Unemployment will run into the mid-double digit figures. With unemployment insurance running out after six months, there is likely to be serious social unrest as soon as the weather turns warmer. Latvia already had one riot on a very cold night of January 13. Some say the reasons were economic, I say they were mixed, with the main reason being total frustration and anger at politicians. But for the efforts of a small contingent of police (apparently backed by a larger number of military police inside), the crowd would have stormed the parliament or Saeima building and probably ransacked it during a running battle with those inside.
The economic crisis is global, but it was not a total surprise. Several economists and analysts warned of it as early as the summer of 2007 and said there were ways that Latvia could prevent the overheating of its economy and the pernicious expansion of credit riding on a real-estate bubble. Wages were also spiraling far ahead of productivity, while productive workers had already left for Ireland years earlier, where they were paid fairly for their labor. Management of many Latvian businesses was short-term oriented and often ignorant of modern, progressive methods and good labor relations. In addition, small and medium businesses with a modicum of success faced capacity expansion problems and could not tool up to economies of scale.
It is now rumored that Latvia will need additional International Monetary Fund (IMF) loans, on top of the 7.5 billion EUR it has already been promised by the IMF and other lenders (Sweden, the EU). It appears that, for all practical purposes, the government’s finances have fallen apart or are about to disintegrate and to top it off, there is no fully functional government. Had Latvia started saving for worse times in 2006 or 2007, had it privatized fixed network operator Lattelecom and mobile operator LMT when Sweden’s TeliaSonera offered to pay around 500 million LVL, the country would still have a potential budget deficit, but a much smaller one and a war chest of several hundreds of millions with which to avoid cutting salaries for police, health and education workers. Although, on the other hand, such a windfall revenue would probably have found its way into the pockets of the ruling elite or have been squandered in other ways. That is the way of failed state Latvia -- prosperity is to be stolen or squandered, poverty and austerity apportioned among those services most essential to sustaining a functioning civil society.
I am not a believer in big government spending, but education, public health and public safety are needed now more than ever, especially since affordable private alternatives or parallel structures have not been allowed to develop (i.e. insurance-based private medicine). Latvia will leave the crisis weaker and more prone to stagnation. The corrupt elite will find itself sucking juices from an increasingly dessicated economic corpse.

Video of Riga Pride 2008

Here is a video of my impressions of the Riga Pride 2008:

Latvians love hate speech, hate free speech

If you follow the often heated internet discussions on the upcoming Riga (gay, lesbian, etc.)Pride March, you quickly come to a disturbing conclusion: Latvians love hate speech and hate free speech.
I will come to the hate speech part later. But on free speech, I would be a wealthy man if I had one lat (USD 2.20) for every comment in a Latvian internet portal where someone writes: “I have nothing against gays or what they do in private, but..
-- why must they show it in public?
--let them march at the city dump or in some remote location.
--this march is unnecessary, no one is discriminated.
--this march will generate more hate and revulsion.
--I draw the line at them flaunting their orientation and problems.
--I don’t want them “showing off” to children and youths.
-- I don’t want to be “forced” to listen to them defending immorality and depravity.
--I draw the line on freedom of assembly when it is an assembly of depraved people.
So there...8 lats, enough for a Tex-Mex meal at the excellent but pricey Igvana restaurant just across the street from my workplace. But there is plenty more...
Reading all of these comments, which are from computer-literate internet users, not the lumpenproles, I begin to see that the debate really isn’t about gay people. The issue is denying those who are radically different the right to a public voice. Latvian public opinion, it seems, is enthusiatically in favor of curbing free speech for those it doesn’t like. The mantra “democracy is not anything-goes” (Latvian visatļautība). That is one of those wonderful “prelude phrases”, the prelude being for some kind of often crackpot argument for banning the gay (or Russian, or ex-Soviet geezers) event, or even going further and arresting and punishing those who even thought of marching, rallying or picketing and even further, passing a strict law against expressing that kind of thought.
Last year, under the cover of a pro-family event in Riga on the same day as the 2007 Pride, radical anti-gay activists gathered thousands of signatures demanding a referendum that would ban some nebulous activity called “propagandizing homosexuality” and would have purged any public service jobs involving contacts with children or youths of any homosexual persons. In other words, bring back censorship and the screening (including denunciations?) of a range of public service employees and job applicants.
It doesn’t stop at that. The desire to surpress free expression has gone beyond the gay issue, that is just an excuse for manifesting a widely-held aversion to the fundamentals of democracy. The Latvian National Security Council recently summoned the head of Latvian Televison and told him that there was too much negative reporting, something which could affect “national security”. Then the speaker of the Latvian parliament, the Saeima, seperately said that Latvian television (which is largely state funded) should start its news broadcasts with coverage of government announcements and activities, rather than sensational murders and other news. This would return TV news to the Soviet era, when the lead stories were always about the actions of Communist Party and government officials, followed by stories of eager and happy kolkhoz workers and the Komsomol leaders at the State Detergent Factory 102.
Finally, a new scandal has erupted with Maris Kucinskis, the leader of the ruling People’s Party (TP) parliamentary faction denouncing an unfinished short film as harming Latvia’s image. The film (as seen in excerpts on YouTube) shows a man with a pig’s snout who resembles former Prime Minister and TP member Aigars Kalvitis. The film has been denied further state funding, allegedly on quality issues, but the politicianš remarks lend credance to speculation that the satirical work is being surpressed as an act of political censorship.
These events lead to the disturbing conclusion that Latvia – both at the political elite level and at grassroots – is drifting away from Western-style democracy and a committment to such basic human rights as free speech and assembly. This may not be unique to Latvia, it is said to extend across Eastern Europe and may be a signal that these countries are not paying off the credit of trust and reliance on which they were admitted to the European Union. In other words, the EU assumed that these issues – imperfect committment to democratic values, corruption, economic incompetance, etc. – would be taken care of or go away once the “new EU countries/societies” ate the carrot of being let into the club of democratic values that is the EU. It hasn’t happened in Latvia.
And now to hate speech. Many of those who say they have “nothing against gays doing it in private” then switch to raving tirade mode and write that “ass fucking degenerates should not flaunt their disease, etc.” You get the picture. Instead of marching, these abominations should be marched off for forcible psychiatric treatment, many commentators said. There is, to be sure, no shortage of “hate speech”, which is nothing more than a profound and scary hatred of those who are different. The same, by the way, goes for black people. A local organization of people of color made what I initially thought was a silly objection to an ad about black (HP) computers that work while white (a swipe at MacBooks/mine is black  )computers relax. But what followed proved they may have been right. Nobody called the protest by the black people living in Latvian and/or black Latvians silly, as I might have, but jumped right into ravings about n***ers and apes daring to speak up in Latvia and how they belonged back in the jungle or wherever they came from.
The hate level here is also well above what is acceptable for being called a civilized nation. However, as a committed libertarian, I am against any and all forms of criminalization of speech and expression, including so-called hate speech. To punish pure speech, as in the case of a Latvian neo-Nazi who calmly told an audience that gypsies and Jews were not human beings, is also a threat to free speech. I stand firmly by the American model of free speech as protected by the First Amendment (see Anthony Lewis’new book Freedom for the Thought That We Hate) and see hate speech legislation in Europe as making the continent as a whole less free. Once a group whose advocacy of hate speech legislation is hard to controvert, such as people of color (few people in societies outside Latvia are happy about open racial abuse) get their way, the path has been cleared for others, for instance, Islamofascists who can claim racism (many Muslims are from the Middle East and look or dress “Arabic”, others are black or Asian) but are actually, in my opinion, a racially neutral ideology advocating a totalitarian society that would make Stalin sit up in his grave in approval (minus the belief in God part). Punishing anti-Islamic hate speech would amount to banning vigorous public debate on what Islam intends to do with the fundamental individual freedoms of Western society.
So, while Latvians merrily rant against “ depraved deformities of nature” and “blackasses” (they could save their bandwidth if a gay black Latvian showed up), I don’t think that any problems would be solved by criminalizing this kind of speech. Surpressing speech doesn’t eradicate the idea, whether it is right or wrong (and leaves less opportunity to identify and criticize glaringly, obscenely wrong ideas). I would rather know that I live in a potentially pre-fascist society rather than have the people with the police, the guns and the jails keep me from knowing it, just like they will if the totalitarians take over.

March for Equality in Riga, June 3

A March for Equality by the gay community and their friends and supporters of human rights took place in a fenced-in park in downtown Riga on June 3. This time, the city allowed the march (a court overturned last year's ban) and there was very heavy police protection (robocop clad riot police ready for anything). The most curious incident was the appearance of some anti-gay protestors just as the march was about to start. Their shouting caused most of the press and camerapeople to run to one of the fences, where the counterdemonstrators shouted obscene abuse in Latvian (and some pidgin language, an attempt at English or German). Most of the press were foreign and looked at the counterdemonstrators with some bafflement, until a young lady with a camera asked me what they were saying. I, being a colleague who respects accuracy above propriety said "they say we in here are all monkey and animals and they want you, or any one of us, to suck them off..:)

Here is my best effort video record of what happened. Sorry about the screwed-up subtitles. The first speaker is Linda Freimane, a board member and spokesperson for Mosaika, the Latvian Lesbian, Gay, Bisexual and Transperson organization (and the friends and supporters of this community).

For the record, I attended this event because I am a libertarian, and I don't belong to any sexual minority. Strangely enough for Latvia, this den of hatred and ignorance, I am not compelled to hate and attack gays just because I am heterosexual.

F**k up this asshole's car

Anyone in Latvia reading this take note. This car belongs to an asshole who parked it on a wheelchair/babycarriage ramp (I saw a father with a pram try to get around it) on the corner of Blaumaņa and Tērbatas Streets in Riga on May 3. This is not the first time I have seen this kind of behavior and I have snapped photos before of various other cars. Now I am posting one.

I think it would be morally justifiable to fuck up this person's car, the instrument of a violation of the rights of others to use the ramp. There are many ways to do this, just look up any of the sites on the internet about revenge, etc. So if you see this vehicle, do it some harm, scratch it, let the air out its tires, in fact, fuck up any car you see similarly parked if you can do it without attracting attention. I had nothing that I could use to scratch the asshole's car or I would have discreetly done it.

From shit to fists

The Latvian daily Diena reports that a gay couple, returning from a bar, was assaulted by youths who first asked them for cigarettes, then asked if they were gay. When one of the men replied in the affirmative, they were assaulted by the youths. This happened around four in the morning, So now the "hate gays for Jesus" movement has gone from shit to fists. I am not going to say that gay bashing has started, but the media have picked it up. Probably, there were earlier cases which were dismissed as ordinary street or barroom brawls. Now, any «same sex» group (including hetero friends) can be stopped, interrogated and punched out if the attackers don't like the response or don't believe it (i.e. if there are two «metrosexually» dressed men going home to their wives/girlfriends and possibly children).

Video snippets of the craziness in Riga

Here they are:


I apologize for the jerkiness and the low quality. The phone is not a digital video camera, it is adequate at best. The shots from my web cam are overexpose, I used it at my summer house.