Friday, November 7, 2008

A sad state anniversary

The 90th Anniversary of the Republic of Latvia is approaching but there is very little to smile about. Prospects of following falsely patriotic speeches, fireworks, presidential reception and complacent politician´s wardrobe show off seem rather out of space now. There are too many serious problems the governing clique has committed, and they even do not feel responsible for them.

Just look on the news of the last two days - Latvian economy contracted (3Q) by -4,7%, Corruption Prevention Bureau (KNAB) finally accused the odious deputy Head of the Internal Revenue Service (VID) Mr Vladimirs Vaskevics in graft and Moody´s cut the Latvian credit rating. Very few people believe in credibility of credit rating agencies these days, thus why should I worry about the Deputy Head of VID being accused by KNAB and Latvian economy contracting?

Because not only complacent politicians but also ignorant Latvian citizens live their lives without really thinking that there are domestic causes for present ills of Latvian economy. When there were economists, political scientists and other experts in their respective field ringing the bells nobody listened. For example, it was a month ago when Morten Hansen wrote a piece clearly outlining why isn´t there a discussion about the R- word. When Morten dared to speak about the too rosy forecasts of Latvian governors back in April it created a small storm. About two month´s ago it was the Prime Minister who predicted that Latvian GDP would grow 2% this year, and he openly questioned the scenario of the Latvian Bank as too pessimistic.

Today, when the negative forecast of the GDP Q3 came in from the Central Statistics Bureau, Latvian media is neither using the R- word, nor trying to ask who was at the helm of the state to allow basically the free fall of economy. Thus, the discourse has miraculously changed, and a word crisis (krīze) is used in a kind of purgatory sense. Incompetent Minister of Finance uttered yesterday, "that these events (financial crisis) could be characterized as rapid transition from the economic model based on a consumer debt fostered real estate bubble, to one founded on competitive and sustainable economics (Notiekošo var raksturot kā strauju pāreju no ekonomikas modeļa, kas balstījās uz parādu veidojoša patēriņa un nekustamā īpašumu tirgus bumu, uz ilgtspējīgu un konkurētspējīgu tautsaimniecību.)" His hare brain would not even be able to produce such a statement, plus he has probably little or no information about the state of the Latvian elementary and higher education system. The VERY SYSTEM that should incubate "sustainable and competitive economic branches" is not only is the least supported in the Baltic States, but in the whole of the EU.

There is an old proverb saying: "that you shouldn´t show readiness of your fists after the fight", and everyone knows who gave the free reign to market participants in Latvia. Just, the fact is that the market was not really free, but serving special interest groups, and while the nascent middle class suffered some tomcats became really fat in this tiny but beautiful country.

Tomorrow the Latvian government must convene in special session and decide whether they will give state guarantees to the list of Latvian companies. Steel smelter Liepajas Metalurgs and several banks - Parex bank, Hipoteku un Zemes banka - are on the list. State guarantees sound like violation of Competition laws of the EU, but if one looks into Rome treaty Art. 92 Subsection 3a and c, it specifies under what conditions government can aid their industries. Considering the extent of the crisis state guarantees sound like a reasonable act, just it is covered in too much of secrecy. Thus, if Ivars Godmanis would allow to pull the veil of secrecy from today's government meeting it would be beneficial for avoiding too many unfounded rumours.

There will be celebrations this year, and Latvian citizens must be proud of their language, history and the state! But they would not be sweet because the celebrations were tarnished by dilettantes in the parliament, and incapacitated ministers luckily not yet running like headless chicken. The 90th birthday looks like an old age, but most of this precious time for majority Latvian citizens was spent under the yoke of the Soviet Union. Real age of the Latvian democracy is just 33 years (1918-1934, 1991-2008), and if one notices problems that exist today, then they are mostly due to the relatively young age of the Latvian democracy. It seems that after the 90th Anniversary there would be a special time of reckoning for some political mavericks. But we still have to live until November 18, because those are not only domestic events that influence countries developments, but increasingly so the external events, and here even domestic Godfathers are powerless. Anniversary is coming, and lets wait and see political reconfigurations following it.

P.S. Those of you reading in Latvian may find the article we wrote with Dr. Axel Reetz in "Akadēmiskā Dzīve" here.

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