Greek model for Latvian crisis?

  • 2011-06-29
  • From wire reports

RIGA - As Greece’s anguish spills into the streets, the three small Baltic countries may offer an example, if not a model, of how to survive an economic crisis through austerity measures, writes The Associated Press. After suffering the deepest recession in Europe during the global financial crisis, Latvia, Lithuania and Estonia swallowed the bitter medicine that Greece is now being asked to take. They slashed pensions, welfare benefits and public sector salaries while raising taxes. Latvia, which came dangerously close to bankruptcy, had to fire thousands of public servants and close schools and hospitals.
It was painful, but the cure has worked, so far. Battered and bruised, the three former Soviet republics are now on a path to recovery. Latvia’s budget-cutting government even won re-election last year.

“Latvia has a lot of lessons for Greece, but they are all coming too late,” said Morten Hansen, head of the economics department at the Stockholm School of Economics in Riga.
The main lesson: Push through austerity measures quickly before public support ebbs. “You can have that support for some time, but not three-to-four years,” he said. “Now people are starting to get more unhappy [in Latvia], but now the worst is over.”
Protests in Greece, where anti-government demonstrations are more common than in Northern European countries, have taken on new momentum. There is a constant sit-in in the central square in Athens, and violent clashes with police have become a regular occurrence.

In the Baltic countries, which for decades suffered under a brutal Soviet occupation, the fiery Greek protests have been met with some bemusement. Besides a couple of clashes in Riga, by mostly young and drunk hooligans, and in the Lithuanian capital, Vilnius, in 2009, the Baltic countries didn’t see any street violence.
“For me it comes down to some cultural differences - we just understand the world differently. We accept the cuts, are not happy with them, especially those who suffer from it directly, but we understand why we have to do that,” said Marge Tubalkain-Trell from Estonia, who lost her job and had trouble getting the medical care she needed because of crisis-related social cuts.

Deimante Doksaite from Lithuania, which narrowly avoided having to take its own bailout during the crisis, agreed. “Greeks are spoiled. Being quiet helped us to deal with the crisis,” said Doksaite, who lost her job as a media relations officer when the crisis struck.

While Greece saw low growth and high debt even before the crisis, Estonia, Latvia and Lithuania were booming in the years leading up to the financial collapse. Credit was pouring in, particularly from the neighboring Nordic countries, resulting in a bubble that burst just before the global recession.

There are some flaws in the Baltic success story. All three countries have experienced a “brain drain” that Greece so far has avoided. The westward migration from the Baltics has been significant ever since they joined the European Union in 2004, but accelerated after the recession.

As a result all three are faced with declining populations, which could yet lead to economic stagnation.
And not everyone here is stoic - there is a growing undercurrent of anger in the Baltic States as well. Dita Gaugere, a Latvian who travels frequently to Greece, said there was probably a lesson for Latvia in how Greeks have responded to their crisis.
“We are too patient,” she said. “Greeks are not spoiled, they just know their rights more than we do. We are followers, we are sheep, we just trust... our political leaders.”