RIGA – Strong winds and heavy snow plagued Latvia today, as winter announced its arrival. White powder covered streets, the wind blew the snow across fields. City fathers are preparing for a flood. We, in Iļģuciems, do not have hot water, but still have electricity. For now.
While it would be premature to talk about the political winter here, the cold biting wind of police state has ripped through the country this week. On Saturday, the newspapers splashed the issue of the freedom of speech across the front pages. The image of Krišjānis Barons with his mouth shut (pictured above), looking at readers of Latvijas Avīze from a 100-lat bill, is a powerful one. After the two-day arrest of a Ventspils economist, the state police also launched a criminal investigation against a musician, following stupid remarks he had made at a concert.
Too often lecturers, economists, or musicians, aren’t the only ones speaking foolish things on economy. Veiko Spolītis offered an outstanding overview of official pronouncements by Latvian politicians and international organizations regarding the current economic slump here.
But I couldn’t help but dig through statements regarding possible devaluation of the national currency in the past. Perhaps, the State Police will give them a call and invite for a chat.
Edward Lucas writing for the Economist on Oct, 18, 2007:
Latvia is in the worst situation. Year-on-year inflation in September was a whopping 11.4%; the current-account deficit over a fifth of GDP. Bank lending, much of it in foreign currencies, has soared, creating a property bubble in the capital, Riga. Overheating has hurt competitiveness. To some the national currency, the lat, looks like the likeliest casualty.
Latvia’s position was not helped when Jürgen Stark, a board member of the European Central Bank, said earlier this month that ex-communist countries wanting to join the euro zone faced “substantial challenges”, banker-speak for “forget it”; Lorenzo Bini Smaghi, another ECB board member, publicly questioned the ability of these countries to keep inflation under control while maintaining fixed exchange rates, a stance that means adopting what is de facto the euro zone’s monetary policy.
Lars Christensen in an interview to the International Herald Tribune, on Nov, 12, 2007:
“I can’t say for sure that I want Latvia to devalue – it’s tough decision,” said Lars Christensen, an analyst with Danske Bank in Copenhagen and a leading voice of gloom in Baltic economics. “But I sure can say that it’s pretty clear the ECB wants Latvia to devalue. It’s hard to see it any other way.”
Bjorn Wahlroos, CEO of Sampros in an interview to Sweden’s Affars Varlden on Oct. 28, 2008.
What is your view of the Baltic countries’ economies in general?
- They have an unreliable mode of a single cause. They all have overvalued currencies, to varying degrees. For those of us who have lived through 1991 in Finland is a trip to the Baltics a déjà vu. It is totally absurd that people think it is useful for anyone to maintain an over-valued currency. It is the surest way to stifle all economic activity in those countries, they lose their overall competitiveness abroad, with the domestic cost is higher than it should be.
Gundars Bērziņš of the People’s Party, the former finance minister, ahead of the summer Constitutional referendum:
“In a case of the positive outcome of the referendum the risks of devaluation will significantly increase. I think that within 18 months, plus six months, the devaluation of lat by 20 – 25 percent may become inevitable.”
Republished in the Latvijas Avīze on Nov. 22, 2008.
[...] Cedriņš’ excellent site also features a good round-up of English-language commentary. The two posts from All About Latvia are particularly [...]