Latvian tragedy

Saturday's Diena has a poignant article (in Latvian). Short summary in English:

A 21-year old Latvian suffering from chronic liver disease (primary sclerosing cholangitis) was waiting for a liver transplant. That would be the first liver transplant performed in Latvia.

The operation was planned for December 2008. Then postponed to March 2009. Then, due to the economic crisis and the healthcare budget cuts, postponed again. The patient was suggested to seek a treatment abroad. Which would cost 80000 Euros which the patient did not have.

Three weeks later, he committed suicide by jumping from a 6th floor window.

The budget cuts are taking their toll. Sometimes, it's a very heavy toll.

Here is the Google translation of the story to English. With some mistakes and untranslated words, but readable.

Humour during crisis

The coalition that governed Latvia until a few weeks ago has been an object of endless parodies and ridicule. Reuters has a good story about that called Nothing Special as Latvia penguins lampoon leaders.

Now, the most-ridiculed government in post-1990 Latvia is gone. (Well, partly gone... and partly part of the new government.) Will Dombrovskis do better?

Latvia has current account surplus in Jan 2009

According to Bank of Latvia, Latvia recorded a half-million lat (700,000 euro, 0.04% of GDP) current account surplus in January 2009. This was the first Latvian current account surplus since mid-1990s.

Here are the monthly current account numbers for the last half-year:

The change is quite stunning: from a deficit of almost 10% GDP in November 2008 to a slight surplus two months later. A change of this speed likely indicates a severe credit crunch: the flow of foreign money into Latvia has stopped or even reversed. (Since Latvia is receiving a sizable loan from IMF/EU, 0.04% surplus means that IMF/EU loan is balanced out by money outflows.)

Signs of crisis in everyday life

A Latvian college whose funding has been cut by 30-something % cuts off the hot water in the student dormitories:

Translation of the sign:

"Attention! From now on, hot water will be supplied only on Wednesdays from 15:00 to 23:00. Administration of [name of the institution]"

There are multiple reports of this happening in different places. And there are many more reports of heating turned off/down in classrooms and students sitting in classes in coats.

Correcting Cristoph Rosenberg

IMF's response to an article in The Economist:

"Latvia's International Monetary Fund (IMF) supported program does not entail large cuts to social spending," Christoph Rosenberg, mission chief for the IMF in Latvia, said in a letter to The Economist.

Although it is true that the fiscal consolidation planned by the Latvian government is indeed large, at around 7% of GDP, social spending, as well as capital spending co-financed by the European Union, is explicitly protected," the IMF representative said in the letter.

What Rosenberg says is half-true, half-false.

True part: social spending was indeed protected from cuts in the December 2008 version of the budget.

False part: the agreement between Latvia and IMF requests that Latvia keeps to 5% of GDP deficit even if the Latvian economy deteriorates further. The revenues of the Latvian budget have been falling rapidly and this means that our government may have to cut 700 mln lats (4-5% of GDP) more from the budget. The unofficial gossip is that there is a 20% cut in social security benefits coming, unless Latvia manages to convince IMF and EU to fund a bigger budget deficit.

Back to blogging

I let my blog fell dormant half a year ago, as I got increasingly busy with my job in Latvia.
Meanwhile, Latvian economy started deteriorating at an increasing speed, to the point that we are watched by the rest of the world as one of the forefronts of the financial crisis.

My work life is still very busy (response of a distant friend when I complained about that: "Consider yourself lucky that you HAVE a job!"). But I am starting to blog again, to describe what is happening in Latvia now.

English language writing about Latvia either focuses on the macroeconomic numbers or on the squabbles of Latvian politicians who keep fighting one another even as the country descends into crisis. What is missing in English language is a human perspective of the crisis, how it is affecting people in their everyday life.

Previously, I've written about numbers and about politicians a lot. I'll keep doing that but I'll also try to give the everyday perspective of the crisis.