A Government Shamed

  • 2009-02-04
I am ashamed.

As we know Latvia is going through severe economic crisis. On Jan. 28 it was said in the news that the Latvian government has committed itself in the memorandum signed with IMF to financially support only commercial banks and is refusing to help other businesses. At the same time there are plans in the pipeline to abolish the monthly family payment of 50 lats to families with young children in Riga due to the lack of funds. Other social benefits are also going to be curtailed as well but the state will agree to support banks. I don't understand.

On Jan. 30 it was made public that 36 percent of all the borrowed funds, i.e. 1.9 billion euros, will go into the banking sector. There are 25 commercial banks today in Latvia, but in Estonia and Lithuania there are 5 and 10 respectively. This economic crisis is largely a financial one and to a very large extent was caused by the banking sector, which recklessly indulged itself in making fast bucks. As the head of real estate company Latio said, during the inflation of the real estate bubble starting 2005 there was 0.5 billion euro flowing into the real estate market every month. So the banks were the ones that contributed the most to heating up the whole economy and entered fierce competition in a lending fever. Now they are going to be the corner stone of economy resuscitation? As an old Latvian adage goes… "putting the he-goat as a gardener." There are growing examples of banks unilaterally raising interest rates where contracts with individuals are so intricately drafted that banks are going to take advantage of it.

Last December president of the Bank of Latvia Ilmars Rimsevics alleged that IMF directly required that Parex bank was to be saved. I doubt it. The government with short notice injected 600 million lats into the ailing private bank which was owned almost exclusively by two people. Besides last October the same Mister said that salaries of ministers should be raised because they were to low. Rimsevics himself up until now received 8,800 lats a month, totaling 150,857 euro a year. It's been calculated he earns more than Condoleezza Rice. I don't understand.

There were plans to introduce the euro by Jan. 1, 2008. Until the beginning of 2007 former PM Aigars Kalvitis was optimistic about it. But at least one year earlier it was already obvious that it was not feasible because of high inflation rates. But everybody in the government followed suit including the then Finance Minister. For more than a year I had been waiting for a statement announcing the impossibility of implementing the plan by Jan. 1. The same former PM last November boasted about being the leader of a government which was responsible for Latvian economy running red hot whilst turning a deaf ear to all the signals and local and international expert admonishments.

He was proud of economic growth that was too fast and could not be sustained. After the imminent crisis exploded, the same man who once promised to the people seven fat years and is directly responsible for things as they stand now, was still in euphoria about his record achievements. Instead of blushing red, Kalvitis has been shown on TV sleeping in the Saeima on at least four or five separate occasions. I don't understand.

Gundars Sondors


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