THE BUDGET

The Latvian Government 2010 budget has been passed by Parliament. It contains many unpleasant tax rises. As you would expect, most of these are being blamed by politicians on the unreasonable demands of the IMF. The IMF team are in town for talks and they are clearly unhappy Bunnies. The key reason is that the budget is a fudge. The Government was supposed to cut 500m off their huge running costs but have wimped and only cut about 350m. This means that the other 150 has to come in tax rises, and this from a national tax base that is shrinking rapidly. Even with this extra blood money, there will still be a 600m shortfall (about 8% GDP I think that is) and of course the money for this has to come from somewhere too. In comes the IMF and EU with their duffel bags of dosh.

On the daily news, the budget sounds as though it balances and quite likely on the surface citizens will think that if the IMF accepts it this it is OK. And if you accept that it is right to run a huge deficit each year then it does appear on paper to balance. The figures technically look as though they work. But that deficit will not go away after the budget and nor will the public suddenly find more money to spend.

The IMF team is between a rock and a hard place. The Government knows this and is playing on it. If the IMF accept this weak and rotten budget they will be blamed when it fails (and it probably will unless God has told Finance Minister Repse something he has not told the rest of us). If they reject it ( and of course they actually have no legal power to do that), it would have to go back to Government and the Parliament again and the Government will fall - In that case a new budget from, for example the Peoples Party, would just give away pre election money in a wave of corrupt populism to win the elections next year. So bad though this budget is, it may be the best of the worst.

And if the IMF withhold their loan (not free gift remember), they will be seen as evil Americans (of which most of them are not of course) and the country could implode socially for lack of ability to pay pensions and unemployment money. And unpaid and hungry Russians suddenly becomes a security issue not to be played with at any cost. And of course there will be no magic money in the next 12 months from a sudden improvement in business, so the overlarge government structure, and the debts from this year will carry over to next and still have to be paid somehow. How this is to be done is of course never discussed.

In recent weeks I have been amazed by the stoicism of the Latvian nation. I knew that they had endured much before under the Soviets but now I can see this character trait in its full glory. But this Government (and those of Kalvitis and Godmanis) has also destroyed any basis for national honesty and decency by unfair tax policies, refusal to accept responsibility for their actions, and by the self seeking way most Parliament members behave and vote. Avoiding paying, and living outside of the rules is growing as a national sport(typically not paying for public transport), and this is very very sad.

What is clear to me is that like Italy in the 70s the country is beginning to work and exist totally independent of authority. Many people I talk to just want to leave, and leave quickly because they simply have no appetite for the fight. I am glad that I joined the SCP. They have stuck to their principles throughout all this, and I have been proud of the way many of the younger members have grown into fine politicians. Our day is probably not yet, but it will come.

What to do now though?