Wednesday, January 14, 2009

Fiddling while Riga burns

Valdis Zatlers, the Latvian President enjoyed himself at the European Parliament yesterday, where he spoke to a formal session.

"In 2009 we will be celebrating 5 years of membership of the European Union".

Yeah, but back in Riga the riot police are having to deal with thousands of demonstrators,

"With a growing lack of confidence in the government´s ability to manage the economic crisis as a backdrop, 10 000 people met in Riga´s Old Town main square to request more consultation with civil society, a "dissolution of the Saeima" and new elections. The demonstration was organized by two political parties ("Society for Another Politics" and "All for Latvia", EP- unaffiliated) and 23 NGOs. It was also supported by the Latvian Social Democratic Workers´ Party (PES) and Concord Centre (EP-unaffiliated), Latvia´s most popular party in recent polls. At the end of the demonstration a crowd, estimated near 1000 descended on the national parliament and also broke windows.

The Government is now planning how to utilise the €7 billion IMF/EC loan to Latvia. Reductions in government employee salaries, higher VAT and excise taxes and a commitment to the IMF are the factors leading to the demonstratioon".

And the fool wants to jointhe Euro as soon as possible. There are none so blind as will not see.

1 comment:

Pieter Cleppe said...

Just a quick remark: Latvia's currency is pegged to the Euro.

As the political plan says, the road ahead is towards eurozone membership, so considerations that Latvia is in need for devaluation have no place:

so Latvia struggles from the euro before it is even a proper member.

As also written up here:

A last Euro-related “outrageous claim for 2009” is that several of the Eastern European currencies currently pegged or semi-pegged to the Euro will come under increasing pressure due to capital outflows in 2009, especially pointing to the Baltic currencies.

Troubles were already underway in 2008. More than €7.1 billion has already been spent by international lenders, the EU and the IMF to assist suffering Latvia, whose currency is being pegged to the Euro. While the IMF – and undoubtedly the EU – won’t argue for dropping the currency peg, prominent economist Edward Hughes builds a case for doing away with it, and allowing Latvia to devaluate its currency in order to recover through exporting.

Hughes mentions that “currency policy has become almost a matter of national strategic importance in Latvia”, underlining how the EU pushes political considerations (eurozone membership as a step towards a Europewide economic government) ahead of economic ones (the need for Latvia to devaluate).