Thursday, December 18, 2008

Godmanis government fall approaching and Argentine scenario replicated?

It should be the hottest time for blogging, but it is the end of the year now. Seasons´s Holidays are approaching and also student papers must be graded. Couple of days ago I went quickly to Helsinki and stopped for a night in Tallinn, and upon return learned that Latvian Wonderland continues its downward spiralling into crisis.

Today the administrative territorial reform after `` sixteen years of painstaking work of Latvian MP´s`` culminated in 56 AYE´s and 36 NAY´s in the hundred member parliament (the reform was started in 1992, the Administrative law was passed in 1998, and the new administrative territorial division being finalized today). Partner of the existing coalition, the Union of Greens and farmers (ZZS) voted en masse against the motion, and the only one who voted AYE was the speaker of the Saeima Gundars Daudze. People´s Party genosse Mareks Seglins in his interview to the Latvian TV ``Valsts pirmas personas`` program just announced that ZZS with their vote opened the opposition Harmony centre party a way into the future governing coalition, however, without specifying whether it means the exit of ZZS out of the coalition.

For the present government it is not easy to survive in present circumstances, and today around thousand activists were around the parliament building in Jekaba St. protesting against the territorial reform and parliament´s decision to quadruple the VAT for certain businesses starting from January 1, 2009. As if the exiting problems would not been enough, there was a public pronouncement that would have easily made its author persona non grata just a month ago. Last Friday the Nobel Prize laureate in economics Mr Paul Krugman gave a guest lecture in Stockholm School of Economics. V. Dombrovskis in his blog gives a link, where Paul Krugman openly compared Latvian present economic crisis with the Argentine one in the 1990´s. Argentine was named star pupil of the IMF. While Latvia performed well and IMF closed its office here in 2004, in reality Latvia was not so good pupil of the EU, particularly if we remember how Latvia failed to deliver all the acquis communautaire requirements until May 1, 2004.

The Argentina meltdown and street riots were widely covered in international media. The dynamics of economic meltdown in both countries is reflected in almost identical macroeconomic data. While the Argentine populace in Buenos Aires was openly rioting for weeks, then Riga and other Latvian towns are still calm. The relative calm is faulty however, because the harsh reality is only slowly setting in for the majority of the Latvian population. Until Season´s Holidays there are not many employers who would disclose their actual plans about the downsizing. While talking with rather few acquaintances from the various businesses I learned that most of the bosses want to reveal the ``real news`` after the New Year´s celebrations... .

The January 5, 2009 wake up in Latvia would be rather harsh and I only wish that the Greek youth calls for pan - European protests would not be followed by similar actions in biggest towns in Latvia, huh, uhh. It is hard to predict exactly how the developments would evolve. However, sporadic pickets in front of the parliament, continued smugness of the PM, and rising unemployment allow me to predict that it will be extremely hard for the government to keep the relative calm in this tiny Baltic republic.

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