In general, Latvia has survived better this year than many pundits, including me, would have thought possible. But the trends have not been good and some of these may come back later with a vengeance
Politically the Dombrovskis government has held firm against all critics with leather-suited finance minister Repse as the backbone. The other parties in the coalition have acted like spoilt children, refusing to sign papers for the IMF they agreed upon previously, and even bringing back the hated Skele to "save the country". Thankfully President Zatlers has improved dramatically over the year and shows new found confidence. Time will tell if he has the personal and political strength to face up to the election challenges created by Skele, Lembergs and Slessers next year. His predecessor VVF had a 5 minute rush into politics again as a possible EU Council President and then promptly disappeared. Former PM Kalvitis went to Russia and raised Latvian national hackles by having longer at dinner with Putin than Zatlers had with Medvedev
The working half of the government managed to deliver the 2010 Budget on time but still tried to cheat by not creating the cuts that were asked for by the EU and IMF. Instead they intend to raise dodgy taxes that most independent financiers think will never create money. The Constitutional Court has already ruled the pensioners cuts illegal so the budget is 100m Ls short before the year has even started. And the tax receipts continue to fall making the budget figures even more suspect. Conspiracy theories abound about the IMF and EU, and about anyone else who can be blamed for the crisis.
Business has steadily declined although there would appear to have been a welcome levelling out from September onwards. Christmas sales were apparently 25% down in the shops from last year. The shops are dropping prices daily and new "cheap shops" are springing up, and doing good business. Some observers see signs of business and export improvement. It is probably too soon to call.
The real weakness this year has been public service. The ministries have simply failed every test thrown at them. The grand plan of employing highly educated professionals and promoting only those with the right political allegiance has become a burst balloon. The appalling results show that the current civil service leadership structure needs a total rethink.
One good thing is that the crisis has put nationality and language onto a back burner, except that is, for the few language bigots who still see anyone not speaking fluent Latvian as evil. Thankfully the Russian speaking Riga Mayor Ushakovs has turned out to be a likable and normal human being with both good and bad sides who just wants to get the job done properly. Businesses of course don't care at all about language, they just want the cheapest worker for the job (I wrote "best" and then realised that this was not true at all - talent still has no meaning here!). Lets hope that a 3 language state is a true bonus from the crisis.
But Russia deserves a mention. As a country it seems unable to behave sensibly when dealing with the Balts. The queues of lorries delayed at the Russian border crossing is a Russian national disgrace. Sending a spy plane to overfly Latvia was also stupid and frankly childish. Lets hope that 2010 sees some common sense and graciousness from the big neighbour. But I won't hold my breath.
And Latvian servicemen and women continue to serve abroad with great distinction and praise. We all owe them a great deal.
The highlight of the year was of course the spoof Mazsalaca meteorite. It brought fame - and a large muddy hole to Northern Latvia. On TV, Interior Minister Linda Murniece tried hard and failed to defend the overserious actions of the police and customs. Everyone enjoyed the very good and funny joke perpetrated by Tele 2 except her. It nearly cost her her job. Tele 2 now totally dominate the airways with outstanding adverts showing that the best of Latvian business is as good as anywhere. If more companies could deliver this vitality, Latvia would soon leave recession.
But what about trends. The black market is back with a vengeance, partially forced there by sheer determination of people and companies to survive and partly because of the incompetence of the government tax structure penalising work and effort. It will be hard to recover honesty. The loss of people from the country will also further reduce tax income and may stunt growth later as firms fight for good workers. Morale is also low but the nation seems set on enduring rather than protesting. If it continues calm as the 2010 budget bites it really will be a miracle. And there are still a few people hell bent on screwing the country for every penny they can get. Corruption is becoming less acceptable but there are still large numbers who either do not care or don't recognise it as wrong at all. But at least shops seem to have stopped closing.
What marks the year for me - I think the friendships gained in common adversity. As I try to make my business work, I am surrounded by friends and colleagues working to reduce the effects of the crisis. Many are unemployed or are trying as hard as me to survive in business. Latvia is full of good people and I am meeting more every day. Lets hope 2010 works for those who deserve it.
Politically the Dombrovskis government has held firm against all critics with leather-suited finance minister Repse as the backbone. The other parties in the coalition have acted like spoilt children, refusing to sign papers for the IMF they agreed upon previously, and even bringing back the hated Skele to "save the country". Thankfully President Zatlers has improved dramatically over the year and shows new found confidence. Time will tell if he has the personal and political strength to face up to the election challenges created by Skele, Lembergs and Slessers next year. His predecessor VVF had a 5 minute rush into politics again as a possible EU Council President and then promptly disappeared. Former PM Kalvitis went to Russia and raised Latvian national hackles by having longer at dinner with Putin than Zatlers had with Medvedev
The working half of the government managed to deliver the 2010 Budget on time but still tried to cheat by not creating the cuts that were asked for by the EU and IMF. Instead they intend to raise dodgy taxes that most independent financiers think will never create money. The Constitutional Court has already ruled the pensioners cuts illegal so the budget is 100m Ls short before the year has even started. And the tax receipts continue to fall making the budget figures even more suspect. Conspiracy theories abound about the IMF and EU, and about anyone else who can be blamed for the crisis.
Business has steadily declined although there would appear to have been a welcome levelling out from September onwards. Christmas sales were apparently 25% down in the shops from last year. The shops are dropping prices daily and new "cheap shops" are springing up, and doing good business. Some observers see signs of business and export improvement. It is probably too soon to call.
The real weakness this year has been public service. The ministries have simply failed every test thrown at them. The grand plan of employing highly educated professionals and promoting only those with the right political allegiance has become a burst balloon. The appalling results show that the current civil service leadership structure needs a total rethink.
The real estate market has bombed. Flat prices for rent and sale are gradually dropping all over the country. There are still some companies with deep pockets holding out for a rich Russian to save them. Some bizarre prices are still apparently being paid. But there are few signs yet of real international investors. The prices have further to drop before anyone with common sense is tempted. The risk of failing to find paying tenants for all the empty flats and offices is just too great.
Socially the country has entered a strange time warp. Everything looks OK on the surface but people are going about their business in a robotic fashion with little joy to be seen. Understandably, many people are now fleeing the country, for UK, or anywhere that will either employ them or marry them. But these are mainly low paid workers. The wandering, coffee drinking executives are becoming unemployed in growing numbers as companies either fail, or thin out the management. There are too few tax incentives and too little investment funding to coerce them back into business again yet. Judging by the joke jobs on offer on CV online, if they are waiting for paid employment, they could be standing in line for a long time.
One good thing is that the crisis has put nationality and language onto a back burner, except that is, for the few language bigots who still see anyone not speaking fluent Latvian as evil. Thankfully the Russian speaking Riga Mayor Ushakovs has turned out to be a likable and normal human being with both good and bad sides who just wants to get the job done properly. Businesses of course don't care at all about language, they just want the cheapest worker for the job (I wrote "best" and then realised that this was not true at all - talent still has no meaning here!). Lets hope that a 3 language state is a true bonus from the crisis.
But Russia deserves a mention. As a country it seems unable to behave sensibly when dealing with the Balts. The queues of lorries delayed at the Russian border crossing is a Russian national disgrace. Sending a spy plane to overfly Latvia was also stupid and frankly childish. Lets hope that 2010 sees some common sense and graciousness from the big neighbour. But I won't hold my breath.
And Latvian servicemen and women continue to serve abroad with great distinction and praise. We all owe them a great deal.
The highlight of the year was of course the spoof Mazsalaca meteorite. It brought fame - and a large muddy hole to Northern Latvia. On TV, Interior Minister Linda Murniece tried hard and failed to defend the overserious actions of the police and customs. Everyone enjoyed the very good and funny joke perpetrated by Tele 2 except her. It nearly cost her her job. Tele 2 now totally dominate the airways with outstanding adverts showing that the best of Latvian business is as good as anywhere. If more companies could deliver this vitality, Latvia would soon leave recession.
But what about trends. The black market is back with a vengeance, partially forced there by sheer determination of people and companies to survive and partly because of the incompetence of the government tax structure penalising work and effort. It will be hard to recover honesty. The loss of people from the country will also further reduce tax income and may stunt growth later as firms fight for good workers. Morale is also low but the nation seems set on enduring rather than protesting. If it continues calm as the 2010 budget bites it really will be a miracle. And there are still a few people hell bent on screwing the country for every penny they can get. Corruption is becoming less acceptable but there are still large numbers who either do not care or don't recognise it as wrong at all. But at least shops seem to have stopped closing.
What marks the year for me - I think the friendships gained in common adversity. As I try to make my business work, I am surrounded by friends and colleagues working to reduce the effects of the crisis. Many are unemployed or are trying as hard as me to survive in business. Latvia is full of good people and I am meeting more every day. Lets hope 2010 works for those who deserve it.
I too am impressed with the resilience of many Latvians to face the adversity with courage. I still see some diehard attitudes amongst workers who have jobs, who work slowly and inefficiently as they do not seem to comprehend what damage they are doing to a company but I also see how hard others work. A podcast was put out by the BBC on the Latvian crisis which was also quite inspiring regarding the attitude of Latvians to the crisis and made me quite proud of this land I now call home.
ReplyDeleteBBC link http://www.bbc.co.uk/podcasts/series/docarchive#playepisode7
Very nice post, says as much about the author than about Latvia. Agree with everything mentioned.
ReplyDeleteProbably, Latvia will meet Year 2011 smaller in population (becuase of immigration), with more effective businesses (they have no other choise to survive), more black market (because of incompetent tax policy) and less government institutions (working in the same fashion as now, they will be forced to resize because of dropping budget resources).
But at some moment it must change? Silent acceptance by the population of all mistakes done by government may cost at the end quit a lot, may be even a country or independence.