Latvians acting more like Germans

  • 2011-02-23
  • From wire reports

RIGA - In 2003, Latvians started to borrow and spend much like the prodigal Americans, but now they have become rather similar to the prudent Germans again, Finance Minister Andris Vilks (Unity) said in an interview to the daily Latvijas Avize on Feb. 18, reports news agency LETA. Latvians’ mentality was similar to that of Germans for centuries, notes Vilks. They saved up and carefully considered their purchases.

“In 2003, Latvians became similar to Americans, especially the new generation. Wages were good, and it was easy to switch jobs. There were many temptations, advertisements, and Latvians quickly got spoiled. However, their savings were insufficient. This squandering should not have been allowed [to happen],” said Vilks.
Now Latvians are gradually becoming similar to Germans again. When they buy cars, apartments or goods, they think about tomorrow and try to save up. The crisis has taught people a lesson and everyone now tries to save more, he noted.
The finance minister added that Latvians should have learned from Estonians’ integrity, determination and attitude towards their country. He believes that the situation in Latvia could have been better, even better than the current situation in Estonia; however, Latvians were unable “to be like the Estonians.”

According to Vilks, reasons for this are that Latvians are more submissive, sometimes greedier, sometimes more envious or cowardly, and not as resolved in following their own principles. Estonia has had its share of problems, there have been disagreements among political parties; however, they were able to overcome their differences and reach agreement and achieve, for example, a zero budget deficit. During the period of economic growth they saved eight percent of the GDP in their state budget, said Vilks.

He pointed out that even now, the situation in Estonia is better - Estonians carried out reforms in education and health care already in the mid-1990s. They knew that it had to be done and managed to reach agreement despite all arguments.
Estonians are more willing to join forces and achieve their goals than Latvians, said Vilks.
He had earlier this month, on the LNT morning show ‘900 Seconds,’ called for Latvians to copy Estonia in those areas which Latvia cannot reform itself. Vilks admitted that Latvia’s current goal is to achieve the same development model as in Estonia, hopefully in three years time. The finance minister reiterated that Estonia’s budget deficit is near zero, the country has introduced the euro, carried out reforms in the health care, and education sectors and developed an efficient state administration.

Estonia itself strives toward Finland’s model, however, this is beyond the reach of Latvia at the moment, said Vilks. He then emphasized that the planned budget consolidation measures will be openly discussed with Latvia’s society, and pointed out that international lenders want Latvia to carry out reforms in the welfare sector. The proportion of budget spending on welfare in Latvia is among the largest in Europe.

The lenders do not wish to see so much money allocated to combating the shadow economy, however, Latvian society demands it, asserted Vilks, emphasizing that it is important to carry out the full 50 million  (see story page 1) lats (71.4 million euro) additional budget consolidation measures called for by the lenders. If the country will not fulfill its obligations to the lenders, it will be seen as a negative signal regarding Latvia’s recovery from the crisis and it is possible that if Latvia has to borrow again, it will be two to four times more expensive, compared to what the lenders offered, and the country may experience difficulties in paying out wages, pensions and benefits at the end of this year already.

The group of international lenders, who arranged a 7.5 billion euro bailout loan package to rescue Latvia’s financial system in 2008, believes that Latvia must carry out additional budget consolidation measures in the amount of 50 million lats in this year’s budget. Talks with the lenders continue .

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