The Downside of Recovery (Part II)

  • 2011-01-27
  • By Monika Hanley

FIRST CASUALTY: Public spending on education was drastically cut as the economic crisis hit, affectinghigher education as well as primary level schools.

RIGA - Latvia has weathered the global economic crisis, and the way it did so is being held up by many as a model to follow for many of its fellow European countries that are working on getting their own government finances in shape. The period of pain, and the current recovery trends, however, mask the turbulence under the surface. 

Unexpected Side Effects:
While it can be expected that periods of economic austerity will bring about unemployment, foreclosures and empty businesses, what may not be as expected is that this leads to a rise in the illegal drug trade as well. This in turn also has been linked to an increase in intravenous drug users and the rate of infection for HIV/AIDS has risen as well in the previous year. “We have seen a rise in drunkenness in the last two years,” said an attending nurse at Riga’s First Hospital. “If it is a product of the crisis, I don’t know. Maybe when people do not have work they have more time for drinking and for drugs,” he explained.
Estonia, the newest member of the eurozone, has long since had the highest percentage of HIV/AIDS infection in the EU with an estimated 1.3 percent of the population infected (adults age 15-49).

“As Europe enters a period of economic austerity, with rising levels of youth unemployment, there are fears that this may be accompanied by an increase in problematic forms of drug use,” the European Monitoring Center for Drugs and Drug addiction (EMCDDA) warned in its annual report.

“Budgetary restrictions were threatening drug treatment programs, used by one million Europeans annually,” the report said, explaining that the long term costs would surpass savings in the short term. 
Estonia is not alone in their fight against HIV /AIDS; neighbors Latvia and Lithuania have also seen a rise in recent years, though it is unclear whether this can be directly related to economic downturn.

While there is a slight decline in Latvia and Lithuania for newly infected persons with HIV/AIDS, what is worrisome is that because of budget cuts and austerity measures, treatment centers are nearly nonexistent, especially in Latvia. “In the given economic situation, the local governments have very few such employees, therefore the scope of work is much smaller than in previous years,” explains Iveta Skripste of the Latvian Center of Infectious Diseases.
The seedy underbelly of society is growing, as budget cuts have reduced not only the amount of aid, but also the amount of policemen and workers aimed at reducing black market drugs and prostitution. In the coming months, a number of reports and analysis of the situation in the region will be published.

“To have progress for some and a huge slump for many is not something desirable for any country, at the expense of its people,” said Dr. Letina, a German-born Latvian now working in Ireland. “If people have become this way due to the crisis and [are] left on the streets, then the crisis for them is still not over. There is money for their recovery as well and we must find it,” she stated.

Alcoholism is rampant in the region, but this is hardly something new. However, while many programs have lost their treatment funding as well as citizens just not being able to afford treatment, an odd silver lining has developed as a result of the pan-European crisis.

Alcoholism for women in the UK has reached an all time high, with experts saying now that the drinking habits nearly mirror men’s, which leads to a dangerous overconsumption, even up to three bottles of wine a night, according to charity ‘Alcohol Concern.’ However, a new trend of going abroad for treatment has arisen from this. Aluston Health, run by Russell Hughes in Riga, has a program called “The Code” which uses the surgical implantation of Disulfiram, which blocks the body’s ability to break down alcohol, causing immense illness and discomfort if alcohol is consumed. The private business is booming and for the 30 - late 40s women who come to seek help in Latvia, they find that the process is much simpler and more efficient.

While many have raved about the process, some doctors in the UK are skeptical, as the drug is normally used legally in tablet form in the UK, and not as an implant. Either way, as a result of one nation’s alcoholism, another nation is benefiting. The only downside is the cost (approximately 3,300 euros), which is quite unaffordable given the local Baltic economy and income, which is unfortunate, given that many of the new alcoholics in Latvia could use treatment.

According to the European University Association, Latvia, as early as 2009, was one of the first EU countries to undergo major public funding cuts to higher education (an initial cut of 48 percent). The cuts were continued in 2010 with 18 percent, putting a lot of pressure on the system, students and teachers.

Estonia has been similarly affected by cuts, but to a lesser extent at 7 percent in 2009 and 10 percent in 2010.
The Latvian Police Academy was also merged with the University of Latvia at the beginning of 2010 when the Academy was liquidated. This was later deemed by the State Audit Office to be a violation, as the reasoning behind the liquidation/merger was lack of funding. The Academy (under the Ministry of the Interior) was closed before an audit was performed, the results of which detail a misuse of funds by the Ministry.

The government of Latvia is currently planning for even more cuts in 2011, which may severely limit already limited access to public education, as many students rely on government funding for their studies.
The European University Association in November of 2010 made a visit to Latvia to take part in high level government talks/debates in the matter of public funding, an issue affecting many countries but most severely Latvia. The country’s 34 institutions of higher learning are threatened with more cuts, and closures, in 2011.

From one side it may look like the government is unnecessarily and drastically cutting funding specifically for higher education of their own volition, however, the IMF and World Bank have put a huge amount of pressure on the government “to reduce drastically public funding of higher education,” (according to a report by the EUA).
The cuts come in the form of support for students, hiring fewer teachers and reducing salaries (already abysmally low). In addition to the mergers of some schools, individual departments have also been combined. Estonia has seen the closing of smaller schools as well.

Not only is higher education adversely affected, but primary, kindergarten and preschools are also being threatened with closure or mergers. This move might have made sense logically, if, since many families have left to seek work abroad, there were fewer children attending these schools. There are not. Currently about 6,000 children in Riga are waiting for a place in one of the municipality schools, and these lists are not about to get shorter. The Riga City Council is attempting to develop a sort of subsidy program for children who are waiting for a place in public school to attend a private institution at 125 lats (178 euros) per month. However, as one might imagine, the cost for a child to attend public school is significantly less than this, both from the side of the parents as well as the government.

Teachers, professors and students in universities are also suffering from a lack of funding, and then some. One professor of humanities at the University of Latvia, who preferred to remain anonymous, said she noticed an increase in alcoholism in the classroom with students, and in fellow professors as well. Which begs the question, why, if things are getting better up top, are things getting worse where it matters most, among the people?

The Future
As discussed last week on this page, the Baltic dance of progress has greatly increased in tempo in the last year. The state banks are optimistic, the IMF is optimistic and governments are starting to be more optimistic as well. And best of all, no one had to devalue and the Latvian model has become one of comparable success for other nations going through similar situations. Now all that’s left is to convince the general population that things are looking up.

Academics, too, are still worried that another crisis may be on the way. “As a small economy that is very dependent on the external markets, we could still feel negative effects from those countries where crisis has occurred only now. Unfortunately, the events in Greece, Portugal and Ireland suggest that another wave of crisis is not excluded,” remarked Professor Baiba Savrina at the University of Latvia to Latvian business magazine Kapitals.

Rietumu Bank’s council member Alexander Kalinovsky put it nicely in a recent forecast for 2011: “Painful but necessary reforms are being implemented in the country with the aim of consolidating the budget and reducing the deficit. One can argue whether these measures are sufficient and whether accents are put correctly, but this very fact is undoubtedly positive.”
The party in the Baltics may have been over for a while, but experts and citizens alike still see reasons to celebrate. This new decade will determine if these Baltic tigers will once again let out a mighty roar. At the moment, even a meow would suffice.