• 2009-03-05

Incoming Latvian Prime Minister Valdis Dombrovskis has a tough job ahead of him.
After the president tasked him with forming a new government one of his first acts was to reveal the true depth of the financial crisis in Latvia. Unsurprisingly, the previous two governments have made a complete mess of things. The situation is grim.

Dombrovskis revealed that the economy is on the verge of collapse and that the country will be facing "bankruptcy" within months if nothing is done. Unfortunately for everyone, the only thing that can be done to prevent it is further budget cuts.

The problem is that there is really nothing left to cut. The effects of the cuts that have gone through in the past few months are already being felt. It is still unclear where Dombrovskis plans to find the 700 million lats he needs to slash from the budget to satisfy the IMF. He now has the unenviable job of facing some tough decisions that will leave a large part of the electorate out in the cold. 

All this just three months after the previous government lavishly praised itself for "successfully" securing a massive loan from the IMF, EU, and other international lenders. It is now clear that the size and conditions of the loan will make it very difficult for Latvia to pull through the crisis without taking even more drastic action.
And now outgoing Prime Minister Ivars Godmanis and outgoing Finance Minister Atis Slakteris have managed to make themselves look even worse by claiming that Dombrovskis' remarks about bankruptcy are mere "political maneuvering."

In defending themselves for leaving the economy in such dire straights, the two politicians said the situation had actually been much worse when the country decided to privatize one of the largest banks in the country, Parex Banka, near the end of last year. Their defense was that they had actually messed things up far worse, but had simply not told anyone about it. As if that would somehow absolve them of being responsible for the country's fiscal train wreck.

Though the country does not have much to look forward to over the coming year, there is still a light at the end of the tunnel. Latvia may still lack the "new faces" that are so badly needed in the political scene, but of the old faces at least Dombrovskis is one of the best. There is still hope. 
There is hope that Dombrovskis will do a better job than rival candidate Edgars Zalans, who was overlooked for the post by the president. There is also the prevailing hope that he will manage to do better for the people of Latvia than the previous two governments have and that somehow he will bring the country through the crisis with as little long-term damage as possible.

Holding on to that last hope is all the outgoing government has left people with.