All About Latvia

RIGA – It was probably a session like any other. Members of parliament gather in the sacred hall to adopt laws, debate the future of this country. But on Nov. 13, 2007, the Saeima adopted adding article 194.1 to the Criminal Code, calling for up to two years in prison for “deliberate dissemination” of false information regarding the financial system of Latvia. The whole debate over the issue can be summed up as follows (the links are in Latvian):

Speaker: Debating the bill changes to the Criminal Code. Mr. Mitrofanovs from PCTVL wants to speak.
Mitrofanovs: It’d be ludicrous to adopt changes to the law because otherwise we’d have to arrest the Cabinet of Ministers and (then) Prime Minister Aigars Kalvītis for spreading false information regarding the inflation in our country. And here’s where it’s better to quote directly

Mitrofanovs: “But, speaking seriously, the new norm in the Criminal Code will create a legal mechanism to prosecute journalists. From now on, any negative or radical evaluation of the nation’s financial situation can serve as a formal reason to start prosecution of a journalist, a publicist or an independent economist.

…

“I think as proposed, the bill’s unresolved problem is it does not distinguish between distribution of news and expression of opinion, between news and forecast, between news and evaluation.

“And what’s the conclusion? Today adopting changes in the Criminal Code regarding news dissemination about the financial situation in the country would be a mistake, this is why I, in the name of our fraction, ask you not to support this proposal and return to developing a new edition when the Criminal Code will be open for amendments.”

Speaker gives a word to Rasnacs, am MP from For Fatherland and Freedom

Rasnacs: Dear members of parliament. This was the proposal from the Bank of Latvia, and the Judicial Commitee, evaluating this proposal, supported it. And it supported it because it talked about a deliberate distribution of news. And with that, Mr. Mitrofanovs’ concerns about freedom of the speech, which is mentioned in the Article 100 of the Constitution, is completely baseless.”

And the debate were closed.

Now less than a year since the law was enacted without a single no-vote - the President signed the law - we have this.

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RIGA – The Latvian journalist, Juris Kaža, has set up a blog devoted to the “Free Speech Emergency” in Latvia. Although I may not share Juris’ zeal, I think the situation with the freedom of speech is disheartening. It is as if the government has taken a page straight of the Kremlin rulebook. Moscow blames the crisis on the rest of the world and particularly on the Best Nation on Earth ™. It also wants to control how local media covers the crisis. It even bans the use of the word “crisis” on national TV.

So it’s no coincidence that the Russian business daily Kommersant on Saturday splashed across the front page a story about Latvian authorities trying to keep everyone’s mouth shut. With the subheading, “In Latvia, authorities started to send to jail for economic forecasts,” the article explains the story of one arrest and one criminal proceeding last week.

The newspaper, however, says “Latvia became the second country in the world that persecutes for dissemination of information about the possibility of the devaluation of a national currency and a threat of the failure of the financial system as a whole.”

The first country? Russia. Apparently, regional prosecutors are to monitor media and are not to allow publication of articles that may provoke a panic among the populace at the time of crisis. Thus, the ban on the c-word. One journalist, Pavel Verstov has already become a victim of the attack. He published a report about cases of suicide on one of the businesses of Magnitogorsk due to the economic crisis on his portal verstov.info (the site is currently down).

Sean’s Russia Blog has more:

In Sverdlovsk, the prosecutor began a check of their local media for disseminating information that might “destabilize the [economic] situation in the region.” Namely, according to Timma Bobina, the head assistant to the prosecutors office, “We were assigned to check information about media attacks via the Internet on credit organizations in Yekaterinburg. If we establish evidence that the law was broken, we can follow up with disciplinary measures, and even criminal punishment against the perpetrators.”

Sverdlovsk isn’t the only region going through such a “check.” Kommersant reports that all of Russia’s regions will look into how local media is reporting on local banks. According to prosecutors, customers in the Far East received an SMS saying that Dalkombank and Vladivostok banks were going bankrupt. In three days, clients withdrew $2.4 million rubles. In Yekaterinburg local media started a panic when it reported that Severnaya Bank, Bank 24.ru, and Ural Bank were to undergo “reconstruction and development.” Apparently the economic crisis has sent many Russians into a panic to withdrawal their savings from banks.

People running to withdraw money; government trying to control the situation; SMS sent out warning of economic collapse; it all sounds very familiar.

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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.

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RIGA – With the economy on everyone’s mind, a regional newspaper Ventas Balss decided to gather a group of experts to chat about future economic prospects of this country of ours.

On October 2, the newspaper published selected excerpts from the discussion with prominent leaders in the community including Ventspils mayor Aivars Lembergs and a lecturer at the Ventspils University Dmitrijs Smirnovs (the link in Latvian).

In the context of the economic development and worries about the future of the middle class, who borrowed and now are unable to pay back their loans, Smirnovs said, “The only thing that I can recommend is: first of all, do not save money in banks; second of all, do not save money in lats because right now it is very dangerous.”

Yesterday, it was reported that the state police arrested “a journalist” for the attempt to destabilize the financial situation in Latvia. The journalist turned out to be none other than Mr. Smirnovs, according to the Russian-language newspaper Telegraf (the link is in Russian).

Rumors about devaluation have exposed the distrust of the jittery public to government officials - from the Prime Minister Ivars Godmanis to the head of the Latvian central bank Ilmars Rimsevics. In 2007, rumors also persisted. Someone sent out SMS messages warning of possible devaluation, causing public officials to calm down the public. In the weekend before the Independence Day, the government decided to nationalize the largest locally owned bank in the Baltics, and some had said the four-day holiday weekend serves as a perfect opportunity to change an economic or fiscal policy. During the holiday weekend, old people queued up at local currency exchange bureaus to change their lats to euros, depleting the currency reserves in some exchange offices.

The nervous public is feeling edgy and willing to listen to any information from anyone else other than the government. It feels as if we’re returning to the turbulent 1990s with weak financial system, blind faith in rumors over official information. This is why it would be prudent for the authorities to explain to the public their plan of action when it comes to economy in a clear and coherent fashion, so that people like my grandmother - who is clueless about the world economic crisis - would understand and stop worrying. Instead, the government chooses to send people to jail for questioning the stability of the currency or the financial system of this country. They are willing to curb freedom of speech and freedom of expression in order to keep the lid on the rumor mill. Instead of reassuring the public, the government adds more fuel to the fire of suspicion and distrust. Tell us how you plan to save the economy, how you plan to restore jobs, and rebuild confidence of the people, then, perhaps, people would not be in rush to say good bye to their hard-earned lats and exchange them for euros.

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