The European Commission declared on 03 November 2011, that Latvia’s three-year US$10.3 billion bailout programme was an example to the rest of the European Union. Speaking after a meeting with Latvian Prime Minister Vadlis Dombrovskis, commission representative Gabriele Gudice stated that the loan package which formally ends on 22 December 2011, had proved to be an exemplary programme for the rest of Europe.
Latvia originally agreed to the bailout with the European Union’s executive and the International Monetary Fund (IMF) at the end of 2008, following a run on leading local bank Parex as the Baltic state’s economy nosedived by what is now known to be a cumulative 25% slump over the 2008-2009 period. However, in June 2011 the region successfully returned to the international financial markets by issuing bonds worth US$500 million.
It has been noted that despite undergoing some of the world’s harshest austerity programmes and deepest recessions, Latvia managed to withstand having to devalue its currency and saw relatively little protest from their residents, unlike other EU countries facing similar austerity packages, notably Greece. Some believe that this is down to a weak trade union movement and persistent memories of Soviet-era hardship, having been ruled by Moscow for five decades until 1991. However, recent provisional census results suggest that the country which believed its population numbered around 2.2 million is now closer to 1.9 million, with 10% of Latvians having left the country since 2010, almost half of which left during the three years of austerity. Demonstrating that Latvians may have been showing their discontent with slashed wages and public spending via a mass exodus rather than through violence and protests.
With the increasingly pantomimesk Greek Government finally announcing a new president on 10 November 2011, a decision which is looking as though it will only delay the almost inevitable default and Italy starring into the abyss, it is easy to suggest that both countries should take a leaf out of Latvia’s book. However, while the achievement of the Latvian administration should be commended, the European Commission has increasingly few things to wax lyrical about these days and it is unsurprising that they are holding out the country’s bailout as a triumph. Realistically though, trying to compare the Latvian economic crisis with the Greek – let alone Italian one – is a giant leap to say the least.
In the end Latvia only borrowed just under US$6 billion of the US$10.3 billion originally agreed, this is just a drop in the ocean particularly compared with the potential bailout needed for Italy, whose national debt stands at US$2.5 trillion. Therefore, unfortunately, it can not sensibly be considered a model by which future bailouts should be administered. It is fair to say, however, that despite the disparity in the amounts, the Latvian people’s hardship is no less poignant than that which is currently being experienced in Greece and will need to be inflicted in Italy, and gives an indication that the movement of huge sections of population could be a result of much need austerity measures, which would leave devastating lasting effects long after protests and Prime Ministerial resignations are a distant memory.
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