LETA news agency reports that a group of Latvian enthusiasts is fixing up a former Soviet nuclear base in Zeltiņi (Alūksne county, NorthEast corner of Latvia). The base used to house nuclear missiles aimed at UK, Germany and Spain. It was abandoned during 1990s when the Soviet Union fall apart and Russian army withdraw together with all the nukes. Now, local history fans are turning it into a museum.
Here is the news video and here is a written report (both in Latvian). And here are some photos.
This is a part of a broader trend towards preserving the "Cold War heritage". In the Central Latvian town of Ligatne, tourists can visit "Bunkurs", a structure 9m (30ft) under the ground which would have served as the command center for the government of Soviet Latvia in case of the unclear war. Now, it's a highly popular tourism object and one can even book it for "Real Soviet-time party".
Friday, February 29, 2008
Tuesday, February 26, 2008
Loss of competitiveness?
Estonian exports in December declined 8% compared to December 2006, while imports declined 3.8%.
This sounds like the dreaded "loss of competitiveness" that economists have been warning about. With salaries rapidly rising in Baltics, so are the prices for Baltic goods and we may reach a point where the rest of the world would no longer buy them at higher prices. And then, the new higher standards of living that we've reached will be unsustainable.
If Estonian numbers represent a trend (rather than a one-time fluctuation which do happen in numbers from small countries like Baltics), Estonia may be there now. Latvia is still not at that stage but the events here repeat Estonia, with 1-2 year delay.
UPDATE: A commenter points out a longer version of the story from Bloomberg. It mentions one of companies that have moved the production from Estonia, due to rising costs: Nolato, a producer of components for mobile phones.
Also, the commenter asks why Rigibor (the interbank interest rate for latvian lats) has fallen so much. (The 3-month rate has fallen from almost 13% in October to 7% now.) I'm not sure but there are two possibilities. It's either some easing policy or the speculators have stopped sending the rates up by borrowing lats for devaluation bets, after realizing that Bank of Latvia will not budge.
This sounds like the dreaded "loss of competitiveness" that economists have been warning about. With salaries rapidly rising in Baltics, so are the prices for Baltic goods and we may reach a point where the rest of the world would no longer buy them at higher prices. And then, the new higher standards of living that we've reached will be unsustainable.
If Estonian numbers represent a trend (rather than a one-time fluctuation which do happen in numbers from small countries like Baltics), Estonia may be there now. Latvia is still not at that stage but the events here repeat Estonia, with 1-2 year delay.
UPDATE: A commenter points out a longer version of the story from Bloomberg. It mentions one of companies that have moved the production from Estonia, due to rising costs: Nolato, a producer of components for mobile phones.
Also, the commenter asks why Rigibor (the interbank interest rate for latvian lats) has fallen so much. (The 3-month rate has fallen from almost 13% in October to 7% now.) I'm not sure but there are two possibilities. It's either some easing policy or the speculators have stopped sending the rates up by borrowing lats for devaluation bets, after realizing that Bank of Latvia will not budge.
Learning geography from my visitor counter
Yesterday, my blog was visited by a person from North Pole.
North Pole, Alaska. It's about 1700 miles south of the geographic North Pole.
North Pole, Alaska. It's about 1700 miles south of the geographic North Pole.
Monday, February 25, 2008
Opinion poll numbers
New opinion poll from Latvijas Fakti about how people would vote if elections were now. For first time, they have included the two new parties that are forming now: one consisting of New Era defectors (lead by Sandra Kalniete) and the group that left Fatherland and Freedom a few days later (lead by Ģirts Valdis Kristovskis) and another lead by People's Party's defectors Aigars Štokenbergs and Artis Pabriks.
The numbers are:
The numbers are:
Harmony Centre 9%The conclusions:
Farmers and Greens 6.7%
Kalniete - Kristovskis party 6.4%
People's Party 6%
PCTVL 5%
LPP/LC 4.6%
Štokenbergs - Pabriks party 3.7%
New Era Party 3.6%
Fatherland and Freedom 2.5%
-----------------------------
undecided or would not vote 46%
- Compared to the previous poll, the biggest loser is opposition's New Era. Kalniete and other former popular ex-New Era people are starting a new party and the former New Era voters are gone to them.
- The coalition parties remain unpopular but not more than two months ago. The huge undecided/would not vote segment is still there. The new parties have convinced the former New Era voters but not much of the rest of the country.
- The undecided voters will probably vote for someone. It's impossible to predict whom. But the next parliament will be quite different from the current one.
Coalition: 39For all of post-independence Latvia, the Russian parties have been left in the opposition. With those numbers, it's hard to think of a stable government without the Harmony Centre, the biggest and the more moderate of the two ethnically Russian parties that we have.
Farmers and Greens 15
People's Party 14
LPP/LC 10
Opposition - ethnically Russian: 31
Harmony Centre 20
PCTVL 11
Opposition - ethnically Latvian: 30
Kalniete - Kristovskis 14
New Era Party 8
Štokenbergs - Pabriks 8
Wednesday, February 20, 2008
Troubling economy news
Rebir, a Latvian electrical equipment manucfacturer is laying off 1000 of its 1200 workers. Rebir is one of the few Soviet era factories which managed to survive throughout the 1990s transition to a free-market economy... only to close its doors now.
According to the news report, the insiders tell a story about younger people from Eastern Latvia leaving for higher wages in UK or Ireland, older workers retiring... and Rebir left with not enough qualified workers. The company tried to fix that by ordering some parts from China... only to discover that the parts and the resulting equipment is not of good enough quality and to see their buyers go away to another equipment supplier.
We don't have an economic crisis in Latvia yet. A few months ago, the unemployment rate was at 5%, the lowest level in more than 10 years and even now, it's only slightly above that level. But reports of this type are worrying. If that's typical of what's happening in Latvia now, we may have more difficult times ahead.
Developing...
According to the news report, the insiders tell a story about younger people from Eastern Latvia leaving for higher wages in UK or Ireland, older workers retiring... and Rebir left with not enough qualified workers. The company tried to fix that by ordering some parts from China... only to discover that the parts and the resulting equipment is not of good enough quality and to see their buyers go away to another equipment supplier.
We don't have an economic crisis in Latvia yet. A few months ago, the unemployment rate was at 5%, the lowest level in more than 10 years and even now, it's only slightly above that level. But reports of this type are worrying. If that's typical of what's happening in Latvia now, we may have more difficult times ahead.
Developing...
Tuesday, February 19, 2008
Our new prime minister has new ideas on fighting inflation
He is blaming statisticians for calculating it in a wrong way. Namely, he thinks that it's wrong to include cigarettes into CPI, because not everyone smokes.
Well, the increase in tobacco taxes was indeed the main contributing factor to January's inflation numbers. But, over the entire year, a "non-smoker's inflation" would still be 13.5%/year. Which is less than 15.8%/year but is still a lot more than it should be.
Well, the increase in tobacco taxes was indeed the main contributing factor to January's inflation numbers. But, over the entire year, a "non-smoker's inflation" would still be 13.5%/year. Which is less than 15.8%/year but is still a lot more than it should be.
Sunday, February 17, 2008
Referendum time?
Latvian Constitution allows popularly initiated referendums but the procedure is quite complicated. For the first stage, the proposal for the referendum needs to gather 10,000 signatures. If the signatures are gathered and verified by Central Electoral Committee, the process passes into the second stage. The Latvian government takes over the signature gathering process and it has to open places in every town and village where people can sign in favour of the referendum. If in one month, 10% of eligible voters sign, a referendum is held.
In practice, most of referendum ideas don't get out of the first stage. Since our independence in 1991 until last year, we' ve only had two proposals gathering 10,000 signatures. One, in early 1990s, was attempting to make citizenship laws extremely strict and fell slightly short of 10% in the second round. The other, by Social Democrats in 2000, was a law prohibiting the privatization of the national energy company, Latvenergo. It successfully passed both stages.
Now, we have two legislative proposals heading into the second stage of this process at the same time. The first proposal was born during the anti-government protests of last year. It would amend the Latvian constitution to allow for dissolution of parliament and early elections via a referendum (initiated through a similar 10,000-and-then-10% signature process). The main parties behind the proposal are Latvian trade unions and Aivars Endzins, the former judge and opposition's presidential candidate in 2007. Some of signatures were gathered during the anti-government protests, the rest throughout the fall and the winter.
The Central Electoral Committee has now successfully validated the signatures and the second stage will begin on March 12. If it succeeds, we can expect a referendum in June or July. And, if the referendum succeeds, I expect an attempt to dissolve the current parliament via the new law. And if that all works, we'll have early elections sometime in the second half of 2009. (All those signature-gathering processes are quite slow...)
The second proposal would raise the minimum old-age pension from 49 lats (70 euros) per month to 135 lats (190 euros). Latvian salaries have been growing quite quickly since 2000 but the pensions have not and many retirees have trouble making the ends meet (if they don't have children who can help). The signature gathering was started by a group of unhappy senior citizens and, a few days ago, Aigars Stokenbergs-lead "Society for different politics" group (which will likely turn into a left-of-center opposition party soon) stepped in. Now, they have the 10,000 signatures and the next steps will follow soon.
I am generally skeptical of referendums on money issues, since they can lead to people voting for impossible combinations of low taxes and high salaries/benefits. But it's a disgrace for Latvia to have people receiving 70 Euro/month retirement benefits.
In practice, most of referendum ideas don't get out of the first stage. Since our independence in 1991 until last year, we' ve only had two proposals gathering 10,000 signatures. One, in early 1990s, was attempting to make citizenship laws extremely strict and fell slightly short of 10% in the second round. The other, by Social Democrats in 2000, was a law prohibiting the privatization of the national energy company, Latvenergo. It successfully passed both stages.
Now, we have two legislative proposals heading into the second stage of this process at the same time. The first proposal was born during the anti-government protests of last year. It would amend the Latvian constitution to allow for dissolution of parliament and early elections via a referendum (initiated through a similar 10,000-and-then-10% signature process). The main parties behind the proposal are Latvian trade unions and Aivars Endzins, the former judge and opposition's presidential candidate in 2007. Some of signatures were gathered during the anti-government protests, the rest throughout the fall and the winter.
The Central Electoral Committee has now successfully validated the signatures and the second stage will begin on March 12. If it succeeds, we can expect a referendum in June or July. And, if the referendum succeeds, I expect an attempt to dissolve the current parliament via the new law. And if that all works, we'll have early elections sometime in the second half of 2009. (All those signature-gathering processes are quite slow...)
The second proposal would raise the minimum old-age pension from 49 lats (70 euros) per month to 135 lats (190 euros). Latvian salaries have been growing quite quickly since 2000 but the pensions have not and many retirees have trouble making the ends meet (if they don't have children who can help). The signature gathering was started by a group of unhappy senior citizens and, a few days ago, Aigars Stokenbergs-lead "Society for different politics" group (which will likely turn into a left-of-center opposition party soon) stepped in. Now, they have the 10,000 signatures and the next steps will follow soon.
I am generally skeptical of referendums on money issues, since they can lead to people voting for impossible combinations of low taxes and high salaries/benefits. But it's a disgrace for Latvia to have people receiving 70 Euro/month retirement benefits.
Friday, February 15, 2008
The next Eastern European bubbles?
Slovakia is now the fastest-growing economy in EU, with an economic growth rate of 14.1%/year. And new car sales in Lithuania have increased by 55.2% compared to last year.
I don't know much about Slovak or Lithuanian economy, but both of those statistics look like Latvia in early 2007. One year later, the economic bubble in Latvia has burst and people are guessing how bad the after-effects will get... Are Slovakia and Lithuania developing similar economic bubble and what they will look like in 2009?
I don't know much about Slovak or Lithuanian economy, but both of those statistics look like Latvia in early 2007. One year later, the economic bubble in Latvia has burst and people are guessing how bad the after-effects will get... Are Slovakia and Lithuania developing similar economic bubble and what they will look like in 2009?
Thursday, February 14, 2008
Signs of economic slowdown in Latvia
In two news stories, one next to another in the economy section of delfi.lv. First, today's "Dienas Bizness" reports that several Latvian manufacturers of concrete are approaching bankcrupcy. As the Latvian housing bubble is bursting, some of the new construction projects are being cancelled. The price of concrete has dropped 15-20% and many manufacturers are struggling to stay alive.
The second story reports increasing lines for milk in farmers' markets. With food price inflation running at 24.8%/year, people are turning to market as a cheaper alternative to grocery stores. I have been hearing that from friends for a couple of months and now it's making the news stories, as well.
The slowdown will probably get worse before it gets better. Developing...
The second story reports increasing lines for milk in farmers' markets. With food price inflation running at 24.8%/year, people are turning to market as a cheaper alternative to grocery stores. I have been hearing that from friends for a couple of months and now it's making the news stories, as well.
The slowdown will probably get worse before it gets better. Developing...
Wednesday, February 13, 2008
New notes from new Russian embasador
Last Friday, Russia appointed Alexander Veshnyakov as the new Russian embassador to Latvia. He is best known as the long time chairmen of Central Election Commision of Russia. For a few days after that, our media were busy translating Russian jokes about Veshnyakov (for example, about him trying to decide whether a three-headed dragon gets one vote or three) into Latvian.
The most interesting was, however, his attitude towards Latvia. He was interviewed by Echo of Moscow radio station before leaving for Latvia and he declared that he will learn Latvian because he considers that as a measure of respect for the country to which he is appointed as the embassador. I've never heard that before from any of previous Russian embassadors...
The most interesting was, however, his attitude towards Latvia. He was interviewed by Echo of Moscow radio station before leaving for Latvia and he declared that he will learn Latvian because he considers that as a measure of respect for the country to which he is appointed as the embassador. I've never heard that before from any of previous Russian embassadors...
Latvia becomes a donor state for World Bank
The World Bank has reclassified Latvia from a borrower state which receives its aid to a donor state which provides aid to other countries.
Wow! I didn't expect it to happen so soon. Despite all the political mess that we have, we are now wealthy enough to be helping others.
Now, I only hope that the burst of economic bubble does not push us back into the category of countries that need help from the rest of the world...
Wow! I didn't expect it to happen so soon. Despite all the political mess that we have, we are now wealthy enough to be helping others.
Now, I only hope that the burst of economic bubble does not push us back into the category of countries that need help from the rest of the world...
Monday, February 11, 2008
December foreign trade statistics
I wasn't planning another economic statistics post today. But the Latvian Statistics press release was too stunning.
In December 2007, Latvian exports increased by 12.9 % (compared to December 2006) while imports decreased 6.2%. Here is the graph comparing this to the previous months (export growth in red, import growth in blue):
Import growth has been slowing down since summer but this is the first month when Latvia is actually importing less than a year ago. The previous time when that happened was in 1999 when Latvia was still struggling with after-effects of 1998 Russian financial crisis (which involved bankcrupcies of several Latvian exporters and a major Latvian bank).
So, we are getting a quite dramatic economic slowdown now. And the curve looks like it's still heading even further down.
Developing...
In December 2007, Latvian exports increased by 12.9 % (compared to December 2006) while imports decreased 6.2%. Here is the graph comparing this to the previous months (export growth in red, import growth in blue):
Import growth has been slowing down since summer but this is the first month when Latvia is actually importing less than a year ago. The previous time when that happened was in 1999 when Latvia was still struggling with after-effects of 1998 Russian financial crisis (which involved bankcrupcies of several Latvian exporters and a major Latvian bank).So, we are getting a quite dramatic economic slowdown now. And the curve looks like it's still heading even further down.
Developing...
Friday, February 08, 2008
Latest inflation numbers (January 2008)
Latvia: 15.8%/year.
Estonia: 11%/year.
Russia: 12.6%/year.
Ukraine: 19.4%/year.
On everyday level, I have seen the price of beer or coffee going up by 25% in more than one eatery in the last few weeks. (The food prices are probably up as well but the changes are harder to figure out, since I don't order the same things every time.)
I'm usually on the optimistic side, when it comes to the outlook for the future but, in these numbers, I simply can't find anything positive... And the fact that Latvia is not the only country going through this, is not a consolation (although it does disprove "the inflation is Kalvitis' fault" nonsense that is popular in Latvia).
Estonia: 11%/year.
Russia: 12.6%/year.
Ukraine: 19.4%/year.
On everyday level, I have seen the price of beer or coffee going up by 25% in more than one eatery in the last few weeks. (The food prices are probably up as well but the changes are harder to figure out, since I don't order the same things every time.)
I'm usually on the optimistic side, when it comes to the outlook for the future but, in these numbers, I simply can't find anything positive... And the fact that Latvia is not the only country going through this, is not a consolation (although it does disprove "the inflation is Kalvitis' fault" nonsense that is popular in Latvia).
Thursday, February 07, 2008
US visa update
Today, someone came across this blog searching for "visa waiver latvia estonia usa 2008". They were probably looking for this story but the story is not so good for Latvia. Estonia (along with Greece and Czech Republic) was added to US visa waiver program. Latvia (and 7 other EU countries from CEE) was not.
Still, it's a good story. Trends in Latvia often mirror Estonia, with one or two years delay. Canada stopped requiring entry visas from Estonians in September 2006 and from Latvians, one year later. So, visa-fre travel to US in 2009 and 2010?
Still, it's a good story. Trends in Latvia often mirror Estonia, with one or two years delay. Canada stopped requiring entry visas from Estonians in September 2006 and from Latvians, one year later. So, visa-fre travel to US in 2009 and 2010?
Wednesday, February 06, 2008
Latvian government gives up on fighting inflation
Yesterday, the Latvian government had a closed two-hour meeting on its ongoing plan. The decision? With the Latvian economy rapidly slowing down, the inflation will slow down naturally. Now, the main concern is that the slowdown may be too sharp and the government is considering boosting the economy by spending more and earlier in the year (as opposed to the traditional Latvian public sector end-of-the-year spending sprees).
So, the anti-inflation plan is about to be forgotten. The planned 1% GDP budget surplus for this year will probably be forgotten too, particularly if the slowing down economy leads to revenues falling short of forecasts.
Meanwhile, the Latvian business press reports that the number of vacancies in Latvian chain stores has decreased by a half, as people start taking up jobs that they would have passed on a few months ago. The job market is still quite tight, though, and I still occasionally overhear conversations about how hard it is to find new employees and how outrageous are the salary demands from people with no experience (and that happens in various sectors of economy, not just one).
UPDATE (Feb 8): EU is still urging austerity for Latvian government. In my opinion, they are a few months behind on what is happening in Latvia.
So, the anti-inflation plan is about to be forgotten. The planned 1% GDP budget surplus for this year will probably be forgotten too, particularly if the slowing down economy leads to revenues falling short of forecasts.
Meanwhile, the Latvian business press reports that the number of vacancies in Latvian chain stores has decreased by a half, as people start taking up jobs that they would have passed on a few months ago. The job market is still quite tight, though, and I still occasionally overhear conversations about how hard it is to find new employees and how outrageous are the salary demands from people with no experience (and that happens in various sectors of economy, not just one).
UPDATE (Feb 8): EU is still urging austerity for Latvian government. In my opinion, they are a few months behind on what is happening in Latvia.
Tuesday, February 05, 2008
January real estate numbers
According to various Latvian real estate companies, the apartment prices in Riga declined another 2% in January. The overall decline, compared to peak prices in April 2006 is now between 12% and 20%, depending on which real estate company you choose to believe. (My anecdotal evidence, from my own ongoing apartment search, is that 20% may be the more accurate estimate.)
The decline has been substantially bigger than anyone expected and does not show signs of stopping. Some real estate companies predict that it will stop in about two months but they were making the same prediction 3 months ago...
The decline has been substantially bigger than anyone expected and does not show signs of stopping. Some real estate companies predict that it will stop in about two months but they were making the same prediction 3 months ago...
Sunday, February 03, 2008
Latvian opposition crisis: three days later
For now, New Era Party (Jaunais Laiks) has lost 4 of its 18 MPs: Ina Druviete, Kārlis Šadurskis, Sandra Kalniete and Ilma Čepāne. The fifth supposed defector, Uldis Grava, decided to stay in the party. The party also lost a number of regional leaders, including almost all the chairmen of the local New Era organizations in the Vidzeme region. There are rumours about more defections next week.
This is the biggest split in a Latvian political party in about 10 years. And it's very high profile people leaving: in 2006 elections, Kalniete and Druviete were #1 and #2 by the number of individual votes among all New Era candidates. Čepāne was #5, Šadurskis was #8.
Here is what is a roundup of what various parties are saying:
The New Era official story
The current coalition is directing government investment to towns where the local governments are controlled by their allies. The towns with New Era mayors are being bypassed. Regretably, this has made some of local New Era leaders to switch parties so that their towns would finally get some money for school repairs etc. As for MPs, some of them (e.g. Kalniete) have been conspiring to destroy New Era from within for a while.
My opinion: the current coalition directing funds to their favorites? Likely true. Is that the main reason for the mass defection? I doubt that. Among the defectors, there's a fair number of people who do not hold positions with any local government and, thus, do not depend on funds distributed by the coalition. And Kalniete being an agent of the coalition, after the same coalition mistreated her in 2004 by not reappointing her to European Commision... that's simply ridiculous.
Defector's stories
The stories vary by the person. Some of defectors say that they wanted New Era to be in the Godmanis' new coalition government, which was formed in December. Others say they want to stay in the opposition.
The common thread is that they complain about their opinions being ignored. During the coalition negotiations in December, the key decisions were made by the party chairman and very small number of people around him, leaving the rest of party leadership out. This is not uncommon in Latvian politics. But New Era was supposed to be a different type of party, with more democratic decision-making within the party. And it didn't turn out that way.
What's next
The New Era Party chairman Krišjānis Kariņš has taken responsibility for the crisis and resigned. The party will elect a new chair on March 1. This will likely lead to the party's founder Einars Repše and the people around him consolidating power.
People's Party is trying to talk the defectors into joining it. People's Party defector Aigars Štokenbergs also wants them to join his new party. And the defectors are talking about starting a new party themselves, possibly together with some MPs from the current coalition who don't feel happy there.
In short, we will probably see more than one new political party in Latvia between now and next spring's municipal election. And there will be more defections from the existing parties in the process.
This is the biggest split in a Latvian political party in about 10 years. And it's very high profile people leaving: in 2006 elections, Kalniete and Druviete were #1 and #2 by the number of individual votes among all New Era candidates. Čepāne was #5, Šadurskis was #8.
Here is what is a roundup of what various parties are saying:
The New Era official story
The current coalition is directing government investment to towns where the local governments are controlled by their allies. The towns with New Era mayors are being bypassed. Regretably, this has made some of local New Era leaders to switch parties so that their towns would finally get some money for school repairs etc. As for MPs, some of them (e.g. Kalniete) have been conspiring to destroy New Era from within for a while.
My opinion: the current coalition directing funds to their favorites? Likely true. Is that the main reason for the mass defection? I doubt that. Among the defectors, there's a fair number of people who do not hold positions with any local government and, thus, do not depend on funds distributed by the coalition. And Kalniete being an agent of the coalition, after the same coalition mistreated her in 2004 by not reappointing her to European Commision... that's simply ridiculous.
Defector's stories
The stories vary by the person. Some of defectors say that they wanted New Era to be in the Godmanis' new coalition government, which was formed in December. Others say they want to stay in the opposition.
The common thread is that they complain about their opinions being ignored. During the coalition negotiations in December, the key decisions were made by the party chairman and very small number of people around him, leaving the rest of party leadership out. This is not uncommon in Latvian politics. But New Era was supposed to be a different type of party, with more democratic decision-making within the party. And it didn't turn out that way.
What's next
The New Era Party chairman Krišjānis Kariņš has taken responsibility for the crisis and resigned. The party will elect a new chair on March 1. This will likely lead to the party's founder Einars Repše and the people around him consolidating power.
People's Party is trying to talk the defectors into joining it. People's Party defector Aigars Štokenbergs also wants them to join his new party. And the defectors are talking about starting a new party themselves, possibly together with some MPs from the current coalition who don't feel happy there.
In short, we will probably see more than one new political party in Latvia between now and next spring's municipal election. And there will be more defections from the existing parties in the process.
Thursday, January 31, 2008
Breaking news
Latvian politics is unexpected. With all the problems in the governing coalition, people were expecting one of parties in it to splinter. And, now, a party is falling apart. But it's not a coalition party, it's the opposition's New Era Party, which has built itself on blasting everything that the coalition does.
2 members of parliament have quit New Era: its 2007 presidential candidate Sandra Kalniete and the former minister of education Ina Druviete. 3 more are about to quit: Kārlis Šadurskis (formerly, the chairman of New Era faction in the parliament), Ilma Čepāne (a high-profile judge of the Constitutional Court, before she joined New Era) and Uldis Grava (the former head of Latvian TV, also before joing New Era). Also leaving are mayors of 8 towns and villages and 14 other regional New Era leaders.
New Era has lost 5 of 18 members of the parliament and at least a half of its high profile members (Kalniete, Druviete and Čepāne were all #1 on New Era candidate lists in the 2006 election in their respective regions). I didn't see this coming and I doubt if anyone else did.
The details of what happened are not known. The New Era's remaining leadership claims that the local leaders have been pressured into leaving by the coalition government denying funding to their local governments. (OK, this might explain the decision by mayors of towns but what about Kalniete, Grava, Čepāne, etc.? They don't look like people who would give in to political pressure.) Those leaving are saying they wanted New Era to be in the new coalition of Ivars Godmanis and felt that their opinion was totally ignored by New Era's leadership.
Given the recent history, we expected another government crisis. Instead, we got a crisis in the opposition. Developing...
2 members of parliament have quit New Era: its 2007 presidential candidate Sandra Kalniete and the former minister of education Ina Druviete. 3 more are about to quit: Kārlis Šadurskis (formerly, the chairman of New Era faction in the parliament), Ilma Čepāne (a high-profile judge of the Constitutional Court, before she joined New Era) and Uldis Grava (the former head of Latvian TV, also before joing New Era). Also leaving are mayors of 8 towns and villages and 14 other regional New Era leaders.
New Era has lost 5 of 18 members of the parliament and at least a half of its high profile members (Kalniete, Druviete and Čepāne were all #1 on New Era candidate lists in the 2006 election in their respective regions). I didn't see this coming and I doubt if anyone else did.
The details of what happened are not known. The New Era's remaining leadership claims that the local leaders have been pressured into leaving by the coalition government denying funding to their local governments. (OK, this might explain the decision by mayors of towns but what about Kalniete, Grava, Čepāne, etc.? They don't look like people who would give in to political pressure.) Those leaving are saying they wanted New Era to be in the new coalition of Ivars Godmanis and felt that their opinion was totally ignored by New Era's leadership.
Given the recent history, we expected another government crisis. Instead, we got a crisis in the opposition. Developing...
Wednesday, January 30, 2008
Latvian retail sales statistics
Latvian Central Statistics Office (CSB) has the retail sales statistics for December 2007. The sales in December 2007 grew 1.7% compared to December 2006. For most countries, this would be an ordinary number. For Latvia, it's not.
The graph below shows the change compared to 2006, for each month of 2007:
As you see, the first half of 2007 was a consumption boom, with sales growing at almost 30%/year. This boom had been actually going for several years. But the peak of the boom was in early 2007.
Now, we are seeing the boom receding and extremely rapidly. From 24.1%/year growth rate in July to 1.7%/year in December. Thisis probably related to the changes in credit policy of Latvian banks. If the trend continues, we will see a decline in sales in a month or two. And, by summer, it will be a very big decline.
This morning, the prime minister promised to stimulate the economy by more government spending if the slowdown turns out to be too rapid. In half a year, the government has gone from thinking how to slow down the economy to thinking how to stimulate it...
Developing... And I don't like the direction in which it's developing.
The graph below shows the change compared to 2006, for each month of 2007:
As you see, the first half of 2007 was a consumption boom, with sales growing at almost 30%/year. This boom had been actually going for several years. But the peak of the boom was in early 2007.Now, we are seeing the boom receding and extremely rapidly. From 24.1%/year growth rate in July to 1.7%/year in December. Thisis probably related to the changes in credit policy of Latvian banks. If the trend continues, we will see a decline in sales in a month or two. And, by summer, it will be a very big decline.
This morning, the prime minister promised to stimulate the economy by more government spending if the slowdown turns out to be too rapid. In half a year, the government has gone from thinking how to slow down the economy to thinking how to stimulate it...
Developing... And I don't like the direction in which it's developing.
Tuesday, January 29, 2008
Airline competition
Today, FlyLAL, the Lithuanian national airline, announced that they will offer cheap flights from Riga to 14 European destinations via Vilnius, Lithuania.
For many years, each of the three Baltic airlines was content with serving its own country. Quite little competition and expensive air tickets.
Things started changing around the time when Baltics joined European Union in 2004. Because of EU's open airline market, the Baltic airlines were now free to fly wherever in EU they wanted (and every EU airline was free to fly to Baltics). Air Baltic, Latvia's airline, was the first to use that. One month after Baltics joining EU, they launched a number of flights from Vilnius, Lithuanian capital. Three and a half years later, Air Baltic is the biggest airline in both Latvia and Lithuania.
Lithuania's FlyLAL (formerly known as Lithuanian Airlines or LAL) looked confused for a long time. A few months ago, they tried to sue AirBaltic for an advertising stunt in which AirBaltic had paid Google to show AirBaltic ads to people googling for FlyLAL. It looks like that lawsuit went nowhere...
Now, FlyLAL is finally trying to outcompete AirBaltic in Latvia with cheap tickets. The airline competition (from Ryanair and others) has already lowered the ticket prices in Latvia substantially. With one more competitor entering the Latvian market, the cheap tickets are there to stay...
For many years, each of the three Baltic airlines was content with serving its own country. Quite little competition and expensive air tickets.
Things started changing around the time when Baltics joined European Union in 2004. Because of EU's open airline market, the Baltic airlines were now free to fly wherever in EU they wanted (and every EU airline was free to fly to Baltics). Air Baltic, Latvia's airline, was the first to use that. One month after Baltics joining EU, they launched a number of flights from Vilnius, Lithuanian capital. Three and a half years later, Air Baltic is the biggest airline in both Latvia and Lithuania.
Lithuania's FlyLAL (formerly known as Lithuanian Airlines or LAL) looked confused for a long time. A few months ago, they tried to sue AirBaltic for an advertising stunt in which AirBaltic had paid Google to show AirBaltic ads to people googling for FlyLAL. It looks like that lawsuit went nowhere...
Now, FlyLAL is finally trying to outcompete AirBaltic in Latvia with cheap tickets. The airline competition (from Ryanair and others) has already lowered the ticket prices in Latvia substantially. With one more competitor entering the Latvian market, the cheap tickets are there to stay...
How complicated company names can you make?
Someone at "Heidelberga" (a Latvian law firm) felt like doing something amusing. And they decided to change the name of their firm to... "Viss mainījies skaļi klusēja migla virs pļavām aiz upes un jenotiņš to sajuta tik skaidri ka aizrāvās elpa un nosvīda uz ceļgaliem rātni uzliktās ķepiņas".
In translation: "Everything has changed loudly quiet fog over meadows on the other side of the river and racoon felt it so clearly that lost breadth and the paws put calmly on knees sweated".
Uzņēmumu reģistrs (the Latvian authority responsible for registering companies) did not like the joke and refused the name change. According to them, a 25-word name is too long for a company and, in any case, free-format poetry is not appropriate in this setting.
If they had allowed the name change, the courtroom reports would have become a lot more amusing...
In translation: "Everything has changed loudly quiet fog over meadows on the other side of the river and racoon felt it so clearly that lost breadth and the paws put calmly on knees sweated".
Uzņēmumu reģistrs (the Latvian authority responsible for registering companies) did not like the joke and refused the name change. According to them, a 25-word name is too long for a company and, in any case, free-format poetry is not appropriate in this setting.
If they had allowed the name change, the courtroom reports would have become a lot more amusing...
Monday, January 21, 2008
Bank of Latvia cuts reserve requirements
On Thursday, Bank of Latvia cut the reserve requirements for Latvian commercial banks from 8% to 7%.
As I've written before, Latvia's monetary policy is largerly controlled by Scandinavian banks which own most of the banking sector in Latvia. In most countries, the central bank controls the monetary policy by raising interest rates (if the economy is overheating) or lowering them (if the economy is going into a recession). In Latvia, with the lat/euro exchange rate fixed, banks can borrow euros from abroad and this effectively sets the interest rates.
During the credit boom of 2005-2007, Bank of Latvia saw that there was too much credit handed out but there was nothing that they could do. Raising interest rates on lat loans just pushed people into taking loans in euros. Then, Bank of Latvia tried requiring banks to keep more money as reserves... which did not work, either.
Now, the situation has reversed. The major Latvian banks are cutting down on new loans in a major way. The Bank of Latvia thinks that the cutbacks are too big and will hurt the economy too much but what they can do? Decreasing the reserve requirements is about the only thing. It will free about 50 million of lats (70 mln euros) which banks had to keep as reserves but will it be enough.
The financial world is increasingly unhappy about what happened in Latvia during the lending boom and Moody's rating agency has cut the credit ratings of both Swedbank and its Baltic subsidiary Hansabank (the biggest bank in both Latvia and Estonia). The possible implication is that Hansabank&Co might not too do much new lending in months to come.
Developing...
As I've written before, Latvia's monetary policy is largerly controlled by Scandinavian banks which own most of the banking sector in Latvia. In most countries, the central bank controls the monetary policy by raising interest rates (if the economy is overheating) or lowering them (if the economy is going into a recession). In Latvia, with the lat/euro exchange rate fixed, banks can borrow euros from abroad and this effectively sets the interest rates.
During the credit boom of 2005-2007, Bank of Latvia saw that there was too much credit handed out but there was nothing that they could do. Raising interest rates on lat loans just pushed people into taking loans in euros. Then, Bank of Latvia tried requiring banks to keep more money as reserves... which did not work, either.
Now, the situation has reversed. The major Latvian banks are cutting down on new loans in a major way. The Bank of Latvia thinks that the cutbacks are too big and will hurt the economy too much but what they can do? Decreasing the reserve requirements is about the only thing. It will free about 50 million of lats (70 mln euros) which banks had to keep as reserves but will it be enough.
The financial world is increasingly unhappy about what happened in Latvia during the lending boom and Moody's rating agency has cut the credit ratings of both Swedbank and its Baltic subsidiary Hansabank (the biggest bank in both Latvia and Estonia). The possible implication is that Hansabank&Co might not too do much new lending in months to come.
Developing...
Friday, January 18, 2008
Defenders of Riga
Defenders of Riga. Rīgas sargi. Everyone in Latvia knows what it is. Hardly anyone outside does.
It's a movie that has been breaking all records. In 5 weeks, it became the most watched Latvian movie since 1991. In 8 weeks, it bypassed Titanic by the number of viewers and became the most popular movie ever in Latvia. I went to watch it a few weeks ago and the movie theatre was still full. I was lucky that there was someone whose plans had changed and who was sellling her ticket in front of the theatre. Otherwise, I'd have to wait for a few hours, because the ticket office was sold out.
Historical background. The movie takes place in 1919 when the newly independent Latvia is less than a year old and is fighting its War of Independence against two enemies at once. One is Soviets, the other is the Landeswehr, a remnant of the army of German Empire. It should have surrendered when the Germany capitulated in the World War I but it didn't. Rather, it started waging its own war towards turning Baltics into a "United Baltic Duchy", a satellite state of Germany, ruled by the local Germans.
In 1919, they were joined by Bermondt-Avalov, a former Russian Tsarist general. Together, they managed to assemble an army of 20,000-50,000 soldiers and attempted to overthrow the Latvian government and establish their government instead. They entered parts of Riga but were eventually defeated by the Latvian army.
The movie shows the battle for Riga between Bermondt-Avalov's forces and the Latvian Army. Just like Latvia, its army is less than a year old. Some units have officers who don't have any soldiers to command. It's not clear at all if they can prevail over Bermondt-Avalov.
The movie. The battle for Riga is shown from a perspective of Mārtiņš, a Latvian rifleman who left home 4 years ago, to fight in World War I. He fought for Tsarist Russia first and for Soviets after that. Then, he hears that Latvia is independent and decides to come back home. At home, he has his fiancee Elsa waiting for him. But Mārtiņš does not realize that the decisive battle - both for Latvia (against Bermondt-Avalov) and for Elsa's heart (she has started to lost her feelings for him) - is still ahead.
Overall, it's a feel-good patriotic movie. There is a clear line between the good (almost everyone on the Latvian side) and the evil (everyone on Bermondt-Avalov's side). The portrayal of the doubts and squabbles on Latvian side is, however, quite realistic. Latvians keep arguing up to the decisive battle and, less than 24 hours before the battle, someone introduces a no-confidence motion against the prime minister. Then, somehow, magically, Latvians pull themselves together and win the battle. In my opinion, that was a good depiction of Latvian character (both squabbles and the ability to pull together when the crunch time comes).
And watching a war movie in which bombs were falling on the familiar streets on which I've walked thousands of time, just a few hundred meters from the movie theater... was so much more intense emotionally.
The movie has come under fire for a lot of minor historical innacuraccies. Soldier Mārtiņš ends up talking a lot (and giving advice to!) prime minister Kārlis Ulmanis. Surely, that's not what happened in the real life! But I understand that the moviemakers wanted to show both the perspective of an ordinary soldier (Mārtiņš) and Commander-in-Chief (Ulmanis) and showing the entire chain-of-command in between the two would have made it too complicated... I think the most important thing was showing the moods and emotions of those days and the movie succeeded in that.
So, overall, I liked the movie. And so did most of the people who went to it. (A few of my friends complained it was too Hollywoodish but they were in minority.)
It's a movie that has been breaking all records. In 5 weeks, it became the most watched Latvian movie since 1991. In 8 weeks, it bypassed Titanic by the number of viewers and became the most popular movie ever in Latvia. I went to watch it a few weeks ago and the movie theatre was still full. I was lucky that there was someone whose plans had changed and who was sellling her ticket in front of the theatre. Otherwise, I'd have to wait for a few hours, because the ticket office was sold out.
Historical background. The movie takes place in 1919 when the newly independent Latvia is less than a year old and is fighting its War of Independence against two enemies at once. One is Soviets, the other is the Landeswehr, a remnant of the army of German Empire. It should have surrendered when the Germany capitulated in the World War I but it didn't. Rather, it started waging its own war towards turning Baltics into a "United Baltic Duchy", a satellite state of Germany, ruled by the local Germans.
In 1919, they were joined by Bermondt-Avalov, a former Russian Tsarist general. Together, they managed to assemble an army of 20,000-50,000 soldiers and attempted to overthrow the Latvian government and establish their government instead. They entered parts of Riga but were eventually defeated by the Latvian army.
The movie shows the battle for Riga between Bermondt-Avalov's forces and the Latvian Army. Just like Latvia, its army is less than a year old. Some units have officers who don't have any soldiers to command. It's not clear at all if they can prevail over Bermondt-Avalov.
The movie. The battle for Riga is shown from a perspective of Mārtiņš, a Latvian rifleman who left home 4 years ago, to fight in World War I. He fought for Tsarist Russia first and for Soviets after that. Then, he hears that Latvia is independent and decides to come back home. At home, he has his fiancee Elsa waiting for him. But Mārtiņš does not realize that the decisive battle - both for Latvia (against Bermondt-Avalov) and for Elsa's heart (she has started to lost her feelings for him) - is still ahead.
Overall, it's a feel-good patriotic movie. There is a clear line between the good (almost everyone on the Latvian side) and the evil (everyone on Bermondt-Avalov's side). The portrayal of the doubts and squabbles on Latvian side is, however, quite realistic. Latvians keep arguing up to the decisive battle and, less than 24 hours before the battle, someone introduces a no-confidence motion against the prime minister. Then, somehow, magically, Latvians pull themselves together and win the battle. In my opinion, that was a good depiction of Latvian character (both squabbles and the ability to pull together when the crunch time comes).
And watching a war movie in which bombs were falling on the familiar streets on which I've walked thousands of time, just a few hundred meters from the movie theater... was so much more intense emotionally.
The movie has come under fire for a lot of minor historical innacuraccies. Soldier Mārtiņš ends up talking a lot (and giving advice to!) prime minister Kārlis Ulmanis. Surely, that's not what happened in the real life! But I understand that the moviemakers wanted to show both the perspective of an ordinary soldier (Mārtiņš) and Commander-in-Chief (Ulmanis) and showing the entire chain-of-command in between the two would have made it too complicated... I think the most important thing was showing the moods and emotions of those days and the movie succeeded in that.
So, overall, I liked the movie. And so did most of the people who went to it. (A few of my friends complained it was too Hollywoodish but they were in minority.)
Thursday, January 17, 2008
Side effects of Shengen treaty
A woman from rural Lithuania tries to catch a ride to Kaunas, the second largest city in Lithuania. A miscommunication with the driver leads to ... her being dropped off in Tartu, Estonia!
One month ago, she would have realized the mistake at the borders between Lithuania and Latvia. Now, all three Baltic countries are part of Shengen zone, border controls have disappeared and one can easily cross from one into another (and then, the third) without even noticing!
Another sign of changing times: after being dropped off in front of a Maxima chain store in Tartu, she thought it was a Maxima store in Lithuania. Chain stores can make any two places in the world look similar...
One month ago, she would have realized the mistake at the borders between Lithuania and Latvia. Now, all three Baltic countries are part of Shengen zone, border controls have disappeared and one can easily cross from one into another (and then, the third) without even noticing!
Another sign of changing times: after being dropped off in front of a Maxima chain store in Tartu, she thought it was a Maxima store in Lithuania. Chain stores can make any two places in the world look similar...
Sunday, January 13, 2008
Hansabank (not) for sale?
As we wrote before, Swedbank (the Swedish bank that owns Hansabank) is having troubles with investors since they've invested a lot in Baltics and the financial world is worried about Baltic economies overheating. The latest reports are that Swedbank's stock has lost 29% in a half year and analysts from Citigroup are recommending Swedbank to sell Hansabank. (The chairman of Estonian Hansapank is denying the possibility of sale.)
This strikes me as a massive overreaction. I've written about the economic bubble in Baltics and I agree that the economic prospects for next few years look a bit precarious. And Hansabanka's profits will certainly be less than expected. But 29% fall in stock price of their parent bank because of that? Stock markets certainly don't look rational to me.
This strikes me as a massive overreaction. I've written about the economic bubble in Baltics and I agree that the economic prospects for next few years look a bit precarious. And Hansabanka's profits will certainly be less than expected. But 29% fall in stock price of their parent bank because of that? Stock markets certainly don't look rational to me.
Thursday, January 10, 2008
Latvian economic statistics (with a puzzle at the end)
Here comes another post on Latvian economic numbers...
While the Latvian economy is doing well at the moment, the numbers have been showing possible dangers in the future. First, Latvia has been importing almost twice as much goods as exporting, for last few years, and paying for that by money borrowed from abroad. The common sense suggests that foreign banks will not be willing to lend ever-increasing amounts of money to Latvia forever. Second, for last year, the Latvian economy has been growing at 11%/year, while industrial production has been growing at 1%/year. Most of the economic growth has come from selling things one to another, financed by borrowed money, rather than actually producing something. Again, by common sense, this cannot last for long.
The most recent numbers suggest that the first of these two trends is now correcting. In November, Latvian exports grew by 24.8% while imports grew by only 4.8%. Here is the graph (red line is the import growth, blue is the export growth):
So, Latvian trade deficit is finally shrinking and substantially. It's still huge, though, and it will take several years until it gets reduced to a more reasonable number.
The second set of numbers, also released this week, is less encouraging. The industrial production grew only by 1.1% in November, compared to last year. The average for January-November 2007 is 1.0%/year. So, it's not clear for how long the rest of economy can keep growing at a much faster speed...
The puzzle is how all those numbers fit together. On one side, we have
While the Latvian economy is doing well at the moment, the numbers have been showing possible dangers in the future. First, Latvia has been importing almost twice as much goods as exporting, for last few years, and paying for that by money borrowed from abroad. The common sense suggests that foreign banks will not be willing to lend ever-increasing amounts of money to Latvia forever. Second, for last year, the Latvian economy has been growing at 11%/year, while industrial production has been growing at 1%/year. Most of the economic growth has come from selling things one to another, financed by borrowed money, rather than actually producing something. Again, by common sense, this cannot last for long.
The most recent numbers suggest that the first of these two trends is now correcting. In November, Latvian exports grew by 24.8% while imports grew by only 4.8%. Here is the graph (red line is the import growth, blue is the export growth):
So, Latvian trade deficit is finally shrinking and substantially. It's still huge, though, and it will take several years until it gets reduced to a more reasonable number.The second set of numbers, also released this week, is less encouraging. The industrial production grew only by 1.1% in November, compared to last year. The average for January-November 2007 is 1.0%/year. So, it's not clear for how long the rest of economy can keep growing at a much faster speed...
The puzzle is how all those numbers fit together. On one side, we have
- industrial production: +1.1%
- imports: +4.8%
- retail sales: +11.2%
- exports: +24.8%
Wednesday, January 09, 2008
Quotes of 2007
Riga Latvian Society is selecting the most amusing quote of the year ("Spārnotais teiciens") every year. In 2007, Latvian politicians provided them with a lot of candidates:
- "Today, I prefer not to lie on live TV" - Ainārs Šlesers, minister of transportation;
- "You, please, don't lie instead of me" - Jānis Urbanovičs, member of the parliament;
- "I'm ready for this step, but I'm not sure in which direction should I step" - Indulis Emsis, ex-speaker of parliament, a few days before his resignation;
- "My opinion has not changed, it has evolved" - Artis Pabriks, minister of foreign affairs;
- "I'm the guarantee of stability" - ex-PM Aigars Kalvitis, a few months before his government started going down in flames.
- "They [Latvia] will only get ears of a dead donkey from us" - Vladimir Putin, when asked whether Russia will ever return Abrene district to Latvia.
Sunday, January 06, 2008
Latvian recognized as European Basketball Player of the Year
Anete Jēkabsone-Žogota has been named as the European Player of the Year for 2007 in women's basketball, by a jury of 100 writers, coaches and players from 28 different countries.
In October 2007, Jēkabsone-Žogota lead the Latvian national team into semifinals of European championships, in one of best performances by the Latvian team in any team sport. She averaged 17.2 points per game, the second highest number in the tournament.
During 2007, Jēkabsone-Žogota also won EuroCup Women with Dynamo Moscow and was named the MVP of EuroCup Women. It's a truly impressive list of achievements in just one year!
UPDATE (Feb 8): Jēkabsone-Žogota wins another European Player of the Year award from FIBA Europe!
In October 2007, Jēkabsone-Žogota lead the Latvian national team into semifinals of European championships, in one of best performances by the Latvian team in any team sport. She averaged 17.2 points per game, the second highest number in the tournament.
During 2007, Jēkabsone-Žogota also won EuroCup Women with Dynamo Moscow and was named the MVP of EuroCup Women. It's a truly impressive list of achievements in just one year!
UPDATE (Feb 8): Jēkabsone-Žogota wins another European Player of the Year award from FIBA Europe!
Friday, January 04, 2008
Will the end of housing bubble be good for Latvia?
A commenter on my previous post writes:
Am I the only one who thinks that a slowdown in the Riga housing market will be beneficial to the economy? I purchased a flat in Riga 2 years ago and had to wait for 3 months to find builders for a minor job... Flipping apartments for a living had become a desirable aspiration.I agree with that. Basing the economy on housing speculation funded by loans from Scandinavian banks is clearly unsustainable. Hopefully, when this is over, Latvia will have both more affordable housing and a healthier economy.
Surely the future of the Latvian economy lies in its ability to compete in the knowledge economy, for instance as a Baltic hub or as a EU springboard to Russia, not to channel a entire generation of young Latvians into quick-buck speculation!
Thursday, January 03, 2008
December real estate numbers
According to Latio, the average Riga apartment price in December 2007 was 1415 Euros/m2. This was 2.1% less than in November 200 and 17.8% less than in April 2007 (when the prices peaked). Compared to December 2006, the prices have declined by 7.3%.
So, Riga real estate is firmly on the downward trend. If 7.3% or 17.8% looks like a big decline, one should remember that it comes after a much bigger multi-year rise in apartment prices, to the degree that they became unaffordable to most Latvians.
For example, from December 2005 to December 2006, also according to Latio, the apartment prices increased by 69% (in one year!). Even combined with this year's decline in prices, we still have a 57% increase from December 2005 to December 2007, which is a lot.
So, Riga real estate is firmly on the downward trend. If 7.3% or 17.8% looks like a big decline, one should remember that it comes after a much bigger multi-year rise in apartment prices, to the degree that they became unaffordable to most Latvians.
For example, from December 2005 to December 2006, also according to Latio, the apartment prices increased by 69% (in one year!). Even combined with this year's decline in prices, we still have a 57% increase from December 2005 to December 2007, which is a lot.
Wednesday, January 02, 2008
Celebrating New Year in Riga...
Laimīgu Jauno Gadu! Happy New Year, everyone! All the best wishes for 2008...
I was in Riga for New Year this time. The big difference from America is that it's easy to buy fireworks for private use in Latvia (in contrast, some US states that ban private use of fireworks entirely, because of safety concerns).
So, in addition to the government-organized fireworks in the center of Riga, we have many smaller ones throughout the city, when people fire up the things they've purchased, from ground or from their windows. And it makes the New Year sky quite colourful.
In the predominantly-Russian suburbs of Riga (like the one in which I'm living), we actually see fireworks twice. First, at midnight Moscow time (since some people are watching New Year broadcasts on Moscow channels via cable or satellite). This corresponds to 11pm Riga time. Then, second time, at midnight Riga time.
In mid-1990s, my suburb would see roughly equal amounts of fireworks at 11pm and midnight. This year, there was a bit at 11pm but much less than it used to be. But, at the actual midnight, the spontaneous fireworks continued for an entire half an hour. Does New Year Moscow time no longer matter to people in Riga, even if their native language is Russian? Maybe...
And, after watching our new president Zatlers give a New Year speech, I'm quite sure that he needs some lessons in public speaking.
I was in Riga for New Year this time. The big difference from America is that it's easy to buy fireworks for private use in Latvia (in contrast, some US states that ban private use of fireworks entirely, because of safety concerns).
So, in addition to the government-organized fireworks in the center of Riga, we have many smaller ones throughout the city, when people fire up the things they've purchased, from ground or from their windows. And it makes the New Year sky quite colourful.
In the predominantly-Russian suburbs of Riga (like the one in which I'm living), we actually see fireworks twice. First, at midnight Moscow time (since some people are watching New Year broadcasts on Moscow channels via cable or satellite). This corresponds to 11pm Riga time. Then, second time, at midnight Riga time.
In mid-1990s, my suburb would see roughly equal amounts of fireworks at 11pm and midnight. This year, there was a bit at 11pm but much less than it used to be. But, at the actual midnight, the spontaneous fireworks continued for an entire half an hour. Does New Year Moscow time no longer matter to people in Riga, even if their native language is Russian? Maybe...
And, after watching our new president Zatlers give a New Year speech, I'm quite sure that he needs some lessons in public speaking.
Thursday, December 27, 2007
While I was away...
Ivars Godmanis became the Prime Minister of Latvia, completing the biggest political comeback in post-independence Latvia. He was the Prime Minister once before, from 1990 to 1993. That time, he left the office deeply unpopular. Before the 1993 elections, he was abandoned by most of his political allies who let him take the plame for the economic difficulties of post-Soviet Latvia. Godmanis-lead Popular Front (Tautas Fronte) went from a two-thirds majority in 1990 to 2.62% of popular vote in 1993. It looked like his political career was finished for good.
Godmanis spent some time as a manager in various companies. He then attempted to come back to politics with Latvian Way party... which soon lost all its seats in the parliament in the 2002 election and was abandoned by many of its most prominent members, just like Popular Front was abandoned in 1993. Once again, Godmanis looked like washed-up politician whose time has passed.
Then, Latvian Way merged with another struggling party, Latvia First Party. Together, they managed to get into the parliament in 2006. Godmanis became the minister of interior affairs. Back in the government, he looked reasonably competent. And, when Kalvitis' government fall in the flames of public anger, Godmanis emerged as the person to lead the new government.
We don't know what happened behind the scenes but some journalists were mentioning Godmanis as a candidate long before he was nominated. I saw a newsmagazine predicting Godmanis' nomination on October 17, a day before the famous protest against Loskutovs firing. That was almost a month before Kalvitis officially resigned. Some Latvian journalists have very good sources...
Economically, the slowdown continues. Consumer confidence index has fallen below 50% for the first time. The slowdown is not affecting anyone around me yet, though.
And Latvian U-20 ice hockey team has qualified for next year's top-division World Championships, by winning this year's Division 1B championships. Very good, our adult team needs some good younger players.
Godmanis spent some time as a manager in various companies. He then attempted to come back to politics with Latvian Way party... which soon lost all its seats in the parliament in the 2002 election and was abandoned by many of its most prominent members, just like Popular Front was abandoned in 1993. Once again, Godmanis looked like washed-up politician whose time has passed.
Then, Latvian Way merged with another struggling party, Latvia First Party. Together, they managed to get into the parliament in 2006. Godmanis became the minister of interior affairs. Back in the government, he looked reasonably competent. And, when Kalvitis' government fall in the flames of public anger, Godmanis emerged as the person to lead the new government.
We don't know what happened behind the scenes but some journalists were mentioning Godmanis as a candidate long before he was nominated. I saw a newsmagazine predicting Godmanis' nomination on October 17, a day before the famous protest against Loskutovs firing. That was almost a month before Kalvitis officially resigned. Some Latvian journalists have very good sources...
Economically, the slowdown continues. Consumer confidence index has fallen below 50% for the first time. The slowdown is not affecting anyone around me yet, though.
And Latvian U-20 ice hockey team has qualified for next year's top-division World Championships, by winning this year's Division 1B championships. Very good, our adult team needs some good younger players.
Tuesday, December 18, 2007
Monday, December 10, 2007
Latvian trade statistics
Latvian Statistics office reports that Latvian exports grew 23.4% year-on-year in October 2007, while imports grew only 12.1%. This is the third consecutive month of exports growing faster than imports, as the graph below shows (the green line is the exports, the red line is the imports):
It's a good sign. Latvian imports are nearly twice the exports and Latvia pays for a lot of that by borrowing money from Scandinavian banks. That is something that cannot last forever and it's good that adjustment has started. It's still a long way to go, though: Latvia has only gone from importing 2.01 times its exports (October 2006) to 1.83 times its exports (October 2007). I hope the trade balances out before Latvia runs up too much of debt, but I'm far from sure about that.
In other news from the statistics office, the inflation is up from 13.2% to 13.7%.
It's a good sign. Latvian imports are nearly twice the exports and Latvia pays for a lot of that by borrowing money from Scandinavian banks. That is something that cannot last forever and it's good that adjustment has started. It's still a long way to go, though: Latvia has only gone from importing 2.01 times its exports (October 2006) to 1.83 times its exports (October 2007). I hope the trade balances out before Latvia runs up too much of debt, but I'm far from sure about that.In other news from the statistics office, the inflation is up from 13.2% to 13.7%.
Sunday, December 09, 2007
Added to the blogroll
Two new English-language blogs from Estonia!
AnTyX has a mixture of posts on economics, politics and everyday life. Of particular note: the recent post about why it's legally impossible to devaluate the Estonian kroon.
Ivan vs. Jaan focuses on Russia and Estonian-Russian relations. Most recent post focuses on the Russian plans of "velvet re-privatization" (FSB-related people forcing Russian company owners to sell them).
AnTyX has a mixture of posts on economics, politics and everyday life. Of particular note: the recent post about why it's legally impossible to devaluate the Estonian kroon.
Ivan vs. Jaan focuses on Russia and Estonian-Russian relations. Most recent post focuses on the Russian plans of "velvet re-privatization" (FSB-related people forcing Russian company owners to sell them).
Thursday, December 06, 2007
How do people handle devaluation fears?
A commenter asks:
Out of those who have savings, some hold them in euros. (I've been advised to do that by several people.) Others just shrug off the devaluation fears. We've had devaluation rumours circulating locally in our country since February or March and nothing has happened yet... I now start seeing more people who are just disregarding devaluation rumours as background noise.
How do people cope with possible devaluation fears, do they hold saving in euro's, I can't see why they wouldn't.First of all, a lot of people don't have much savings. There' s much more debt than savings. Latvia has 140% of its annual GDP in its external debt and most of this debt has been generated by people and companies, rather than the government (whose debt is just 10% of GDP).
Out of those who have savings, some hold them in euros. (I've been advised to do that by several people.) Others just shrug off the devaluation fears. We've had devaluation rumours circulating locally in our country since February or March and nothing has happened yet... I now start seeing more people who are just disregarding devaluation rumours as background noise.
Is it allowed or common in Latvia to pay for every day things with other than a local currency?No. But it's easy to change currencies or to have a foreign-currency account at a local bank and change the money to lats whenever necessary.
Wednesday, December 05, 2007
Retrospective on Kalvītis government
Today, Latvian prime minister Aigars Kalvītis turned in his resignation, as he promised a few weeks ago.
In a country known for coalition governments that rapidly fall apart, Kalvītis has been Prime Minister for last 3 years, since December 2, 2004. Latvia has had only one democratically elected Prime Minister, Ivars Godmanis, who served longer (from May 1990 to August 1993).
Both Kalvītis and Godmanis left the office deeply unpopular. In Godmanis case, it was the difficult economic transition from Soviet economy to market economy. The industrial production was falling by 30%/year and a lot of people were losing their jobs.
Kalvītis case is completely different. A few months ago, I came back from being abroad for many years and found a country that has changed for better. The Latvian economy has been growing at 11%/year. The inflation is rising, but people are spending more. The retail sales have been growing at around 20%/year (after adjusting for inflation), for most of Kalvītis' term. The number of Latvians leaving their country for better paid jobs in Ireland or UK is a half of what it used to be 2 years ago. I have my doubts about sustainability of those trends, but the problems with that have not started setting in yet...
Bill Clinton once famously said: "It's the economy, stupid". Kalvītis' government assumed that was the case. They were wrong.
With the economy improving, people start having other concerns. They start demanding more of their government. They have less tolerance for corruption. They become less willing to tolerate millions in government money disappearing through shaddy deals. Many of the people in Tautas Sapulce demonstration were not poor people who have been left behind by the economic boom. Rather, they were people who were comfortable in their everyday lives but wanted the government to do better. To be less corrupt and more helping to those in need. They did not want to have to say "My life is fine but the government sucks" much longer.
We will soon know who the next prime minister is. The government will probably be a re-shuffle of the current one. Kalvītis will take the blame for the past mistakes and the current coalition will attempt to make people believe that they have changed.
In a country known for coalition governments that rapidly fall apart, Kalvītis has been Prime Minister for last 3 years, since December 2, 2004. Latvia has had only one democratically elected Prime Minister, Ivars Godmanis, who served longer (from May 1990 to August 1993).
Both Kalvītis and Godmanis left the office deeply unpopular. In Godmanis case, it was the difficult economic transition from Soviet economy to market economy. The industrial production was falling by 30%/year and a lot of people were losing their jobs.
Kalvītis case is completely different. A few months ago, I came back from being abroad for many years and found a country that has changed for better. The Latvian economy has been growing at 11%/year. The inflation is rising, but people are spending more. The retail sales have been growing at around 20%/year (after adjusting for inflation), for most of Kalvītis' term. The number of Latvians leaving their country for better paid jobs in Ireland or UK is a half of what it used to be 2 years ago. I have my doubts about sustainability of those trends, but the problems with that have not started setting in yet...
Bill Clinton once famously said: "It's the economy, stupid". Kalvītis' government assumed that was the case. They were wrong.
With the economy improving, people start having other concerns. They start demanding more of their government. They have less tolerance for corruption. They become less willing to tolerate millions in government money disappearing through shaddy deals. Many of the people in Tautas Sapulce demonstration were not poor people who have been left behind by the economic boom. Rather, they were people who were comfortable in their everyday lives but wanted the government to do better. To be less corrupt and more helping to those in need. They did not want to have to say "My life is fine but the government sucks" much longer.
We will soon know who the next prime minister is. The government will probably be a re-shuffle of the current one. Kalvītis will take the blame for the past mistakes and the current coalition will attempt to make people believe that they have changed.
Tuesday, December 04, 2007
More numbers!
Opinion poll numbers, this time. The voting intentions of Latvians, according to Latvijas Fakti:
Right now... people's everyday lives are fine, the economy is great in short term (I have my doubts about medium/long term perspectives and I've written about those in detail on this blog... but the possible problems are not showing up in everyday life yet). Yet, the political elite looks progressively dysfunctional... and it's not like the opposition looks much better than the coalition, either (click here for the latest example of that).
In a weird way, it looks like what US is going through... people are fine themselves but a lot of them don't trust any side of the political divide... neither Bush nor Democrats.
Saskanas Centrs (Harmony Centre) 10.8%The most telling is this comparison:
Jaunais Laiks (New Era) 7.8%
ZZS (Farmers and Greens) 6.2%
Tautas Partija (People's Party) 5.1%
PCTVL 4.5%
all parties combined 48.8%One of our pollsters noted that we have not seen as big percentage of undecided voters since 1995. Back then, the main Latvian bank (Banka Baltija) was bankcrupt, people's savings were gone and country's economy was still in shambles after a difficult post-Soviet transition.
"would not vote" or "undecided/none of the above" 51.2%
Right now... people's everyday lives are fine, the economy is great in short term (I have my doubts about medium/long term perspectives and I've written about those in detail on this blog... but the possible problems are not showing up in everyday life yet). Yet, the political elite looks progressively dysfunctional... and it's not like the opposition looks much better than the coalition, either (click here for the latest example of that).
In a weird way, it looks like what US is going through... people are fine themselves but a lot of them don't trust any side of the political divide... neither Bush nor Democrats.
Monday, December 03, 2007
November real estate numbers
This is the monthly update on how the Latvian housing bubble is deflating. According to Latio real estate agency, the average apartment price in Riga in November 2007 was 1445 Euros/m2 which is:
The companies have different opinions on where it is going. Balsts and a few other realtors say that the rental prices are going up, because more people are renting instead of buying. That would make buying and then renting out profitable, thus stopping the fall in prices. Latio monthly report is skeptical about this argument.
- 3% less than in October 2007;
- 16% less than in April 2007 (when the prices peaked);
- 1.6% less than in November 2006 (this is the first month when we have a year-on-year decrease in prices).
The companies have different opinions on where it is going. Balsts and a few other realtors say that the rental prices are going up, because more people are renting instead of buying. That would make buying and then renting out profitable, thus stopping the fall in prices. Latio monthly report is skeptical about this argument.
Friday, November 30, 2007
Slowdown in Latvian economy
After the dramatic credit cutbacks by major Latvian banks a few months ago, the Latvian economy is clearly slowing down.
At the beginning of this year, at the peak of the Latvian boom, retail sales in Latvia were growing at 28% year-on-year. (It's hard to believe, but it was 28% after adjusting for inflation.) Now, October statistics are out and the increase in retail sales is down to 8.9% year-on-year. And, looking at the monthly data, the October sales are actually down 0.8%, compared to June when the slowdown begun.
The economic trend is clearly changing and the multi-year economic boom is over. It's still not clear if it will be a soft or a hard landing for Latvian economy. The opinions around me differ, with friends closer to real-estate business (which has been affected by the credit cutbacks more than anything else) being the most pessimistic (as in "It can be a vary hard landing").
At the beginning of this year, at the peak of the Latvian boom, retail sales in Latvia were growing at 28% year-on-year. (It's hard to believe, but it was 28% after adjusting for inflation.) Now, October statistics are out and the increase in retail sales is down to 8.9% year-on-year. And, looking at the monthly data, the October sales are actually down 0.8%, compared to June when the slowdown begun.
The economic trend is clearly changing and the multi-year economic boom is over. It's still not clear if it will be a soft or a hard landing for Latvian economy. The opinions around me differ, with friends closer to real-estate business (which has been affected by the credit cutbacks more than anything else) being the most pessimistic (as in "It can be a vary hard landing").
Monday, November 26, 2007
More anti-inflation protests
Last Saturday, 70,000 Slovenians protested against rising inflation. This weekend saw a similar protest in Vilnius. 4,000 Lithuanians took to streets to protest against high inflation and low wages. This looks like a regional trend now.
Latvian labor unions organized two similar protests against government's budget in October but, although Latvian inflation is now at 13.2%, they gathered a smaller number of people (between 200 and 2,000, depending on whose estimate we believe). There are two possible explanations:
Latvian labor unions organized two similar protests against government's budget in October but, although Latvian inflation is now at 13.2%, they gathered a smaller number of people (between 200 and 2,000, depending on whose estimate we believe). There are two possible explanations:
- Salary increases in the last years have been sufficient to compensate for inflation, or
- Latvians are so indifferent that it takes much more than in other countries until they start protesting.
Sunday, November 25, 2007
Economic news from Slovenia
Global Voices Online links to two stories about Slovenian economy:
- 70,000 Slovenians protest in Ljubljana, demanding higher wages, to compensate for rising inflation;
- The apartment prices in Slovenia have been rapidly rising (here are up-to-date numbers).
Housing bubble and rising inflation is a familiar picture to Latvians and many other countries in Eastern and Central Europe, as documented by Eastern European Economy Watch or some of my own posts.
Slovenia, however, was supposed to be the success story, immune from the overheating trends seen elsewhere. Their economic fundamentals are still quite good. But this reminds me that Latvian economy was viewed as the Eastern European success story just two years ago. ("Safe investment opportunity with 7-8%/year growth".) Too large amounts of foreign money pouring into a country in too short time can create economic bubbles quickly.
- 70,000 Slovenians protest in Ljubljana, demanding higher wages, to compensate for rising inflation;
- The apartment prices in Slovenia have been rapidly rising (here are up-to-date numbers).
Housing bubble and rising inflation is a familiar picture to Latvians and many other countries in Eastern and Central Europe, as documented by Eastern European Economy Watch or some of my own posts.
Slovenia, however, was supposed to be the success story, immune from the overheating trends seen elsewhere. Their economic fundamentals are still quite good. But this reminds me that Latvian economy was viewed as the Eastern European success story just two years ago. ("Safe investment opportunity with 7-8%/year growth".) Too large amounts of foreign money pouring into a country in too short time can create economic bubbles quickly.
Friday, November 23, 2007
Different politics?
With Latvian politics in flux, it's virtually certain that new political parties will appear between now and the next parliamentary election.
This month, we saw the first one. It's lead by Aigars Štokenbergs and called "Society for different politics". I'm on the optimistic side about it, except that...
The promises of "new type of politics" are a bit worn out here, in Latvia. Over the last 10 years, we have seen New Party, New Era Party, New Democrats, New Centre Party (which even started with "Different politics" as its official name) ... "Different politics" now sounds like those laundry detergent ads in which they compare themselves to "regular detergent" and claim to produce much cleaner laundry. Repeated so many times by so many advertizers...
On to the substance... Aigars Štokenbergs is a Latvian millionaire businessmen who used to belong to People's Party and served as the minister of economy and regional development for one and a half years. He was on their shortlist for Latvian president this spring but the party nominated Maris Riekstins instead. Then, the relationship between Štokenbergs and the party deteriorated rapidly and he was formally expelled in October. He cited his opposition to business interests of Andris Šķēle as the reason. If that's indeed the case, I wonder how Štokenbergs managed to stay in People's Party for 8 years. Šķēle has been influential there forever.
His team includes another People's Party rebel (and another almost-presidential-candidate-from-People's Party), Artis Pabriks and several former top managers. Like Ivars Lacis (until recently, the rector of University of Latvia). They certainly have a substantial amount of managerial talent there (and, because of that, my doubts about New Era Party don't apply to them).
In terms of political ideas, they are hard to figure out. On his blog, Štokenbergs can start a sentence with asserting his right-of-center ideas and then talk about Scandinavian style welfare state as Latvia's future. How that fits together, I don't know. He either means some type of social market economy or is just trying to appeal to every possible constituency simultaneously (time-honored tradition of Latvian politics).
And he speaks of new tax on "speculative wealth". Hmm, how can a tax service distinguish between speculative and non-speculative wealth?
For now, I'm more positive about them than negative. But I can't resist making jokes about "different politics".
This month, we saw the first one. It's lead by Aigars Štokenbergs and called "Society for different politics". I'm on the optimistic side about it, except that...
The promises of "new type of politics" are a bit worn out here, in Latvia. Over the last 10 years, we have seen New Party, New Era Party, New Democrats, New Centre Party (which even started with "Different politics" as its official name) ... "Different politics" now sounds like those laundry detergent ads in which they compare themselves to "regular detergent" and claim to produce much cleaner laundry. Repeated so many times by so many advertizers...
On to the substance... Aigars Štokenbergs is a Latvian millionaire businessmen who used to belong to People's Party and served as the minister of economy and regional development for one and a half years. He was on their shortlist for Latvian president this spring but the party nominated Maris Riekstins instead. Then, the relationship between Štokenbergs and the party deteriorated rapidly and he was formally expelled in October. He cited his opposition to business interests of Andris Šķēle as the reason. If that's indeed the case, I wonder how Štokenbergs managed to stay in People's Party for 8 years. Šķēle has been influential there forever.
His team includes another People's Party rebel (and another almost-presidential-candidate-from-People's Party), Artis Pabriks and several former top managers. Like Ivars Lacis (until recently, the rector of University of Latvia). They certainly have a substantial amount of managerial talent there (and, because of that, my doubts about New Era Party don't apply to them).
In terms of political ideas, they are hard to figure out. On his blog, Štokenbergs can start a sentence with asserting his right-of-center ideas and then talk about Scandinavian style welfare state as Latvia's future. How that fits together, I don't know. He either means some type of social market economy or is just trying to appeal to every possible constituency simultaneously (time-honored tradition of Latvian politics).
And he speaks of new tax on "speculative wealth". Hmm, how can a tax service distinguish between speculative and non-speculative wealth?
For now, I'm more positive about them than negative. But I can't resist making jokes about "different politics".
Thursday, November 22, 2007
On "seven fat years"
"Seven fat years" have gone empty, says this article. Inflation is completely out of control, exceeding 12%/year by the end of the year. And, from perspective of many people, it feels like 25%/year.
Sounds like Latvian opposition speaking about Latvia? Actually, it's Mikhail Kasyanov speaking about Russia. Economic trends have been similar across many countries in Eastern Europe (no matter whether they are in EU or not, or whether they are democracies or not exactly). Baltics, Bulgaria, Romania, Russia, possibly a few more...
Sounds like Latvian opposition speaking about Latvia? Actually, it's Mikhail Kasyanov speaking about Russia. Economic trends have been similar across many countries in Eastern Europe (no matter whether they are in EU or not, or whether they are democracies or not exactly). Baltics, Bulgaria, Romania, Russia, possibly a few more...
Tuesday, November 20, 2007
On hopes and fears
Over the last months, Latvia has witnessed a rising tide of opposition to the present government. The protest against the government's attempt to fire Loskutovs and Tautas Sapulce were two manifestations of that. 7000 signatures in favour of a referendum on early elections is another. Eventually, this tide may sweep away the current coalition.
When I think of that, I'm sometimes hopeful and sometimes skeptical. In my previous post, I expressed the hopeful side. This post is about the skeptical one.
So... assume that Latvia has a new government. Not just the present coalition with a few different ministers (which we'll get in a few weeks). A government whose core consists of parties and people not represented in the current one (New Era Party and whatever else may form out of the present political storm). There are two ways how it could go wrong.
First, the new government may have the same problems as the old one. As Loskutovs-lead KNAB recently revealed, 11 members of Latvian parliament are either employing their relatives as aides or using their housing allowances to rent from relatives... quite possibly, at more than the market rate! Well, before Loskutovs was crowned as the anti-corruption hero by public, he had his own scandal with giving pay raises to his girlfriend who was also his subordinate at KNAB. Scandals of this type are not restricted to the present coalition and its supporters.
Second, they may be just a bit too eager to fight the corruption, at the cost of neglecting other issues. This charge has been repeatedly thrown at New Era Party and its appointees. Aivars Lembergs, the troubled mayor of Ventspils, has his famous battle with Ojars Grinbergs, New Era's appointee to the board of Ventspils Nafta oil transit company. Lembergs characterized Grinbergs as totally uninterested in doing anything to run the company. He was there just to fight Lembergs, not to do anything boring that might actually make the company function better. Now, do I really want my country to run by people like that?
One or the other of those two concerns have kept me from supporting New Era Party most of the time. I still have to form my opinion about the Štokenbergs-lead "Cita Politika" (Different politics) organization.
When I think of that, I'm sometimes hopeful and sometimes skeptical. In my previous post, I expressed the hopeful side. This post is about the skeptical one.
So... assume that Latvia has a new government. Not just the present coalition with a few different ministers (which we'll get in a few weeks). A government whose core consists of parties and people not represented in the current one (New Era Party and whatever else may form out of the present political storm). There are two ways how it could go wrong.
First, the new government may have the same problems as the old one. As Loskutovs-lead KNAB recently revealed, 11 members of Latvian parliament are either employing their relatives as aides or using their housing allowances to rent from relatives... quite possibly, at more than the market rate! Well, before Loskutovs was crowned as the anti-corruption hero by public, he had his own scandal with giving pay raises to his girlfriend who was also his subordinate at KNAB. Scandals of this type are not restricted to the present coalition and its supporters.
Second, they may be just a bit too eager to fight the corruption, at the cost of neglecting other issues. This charge has been repeatedly thrown at New Era Party and its appointees. Aivars Lembergs, the troubled mayor of Ventspils, has his famous battle with Ojars Grinbergs, New Era's appointee to the board of Ventspils Nafta oil transit company. Lembergs characterized Grinbergs as totally uninterested in doing anything to run the company. He was there just to fight Lembergs, not to do anything boring that might actually make the company function better. Now, do I really want my country to run by people like that?
One or the other of those two concerns have kept me from supporting New Era Party most of the time. I still have to form my opinion about the Štokenbergs-lead "Cita Politika" (Different politics) organization.
Wednesday, November 14, 2007
Saturday, November 10, 2007
Change is in the air
Some more thoughts on Tautas Sapulce, with one week delay.
When I look at the list of people who signed in support of Tautas Sapulce, last week's anti-government gathering, it feels a bit like in year 1988.
In the summer of 1988, the Latvian independence movement started. It was mainly started by intellectuals: writers, artists, journalists. Then more people joined. The new independence activists came from all walks of life. In 1991, Latvia won independence. By 1993, some of Latvian Americans, Latvian Australians, Latvian Germans came back to their home country and joined the politics. At one point, our government had 5 ministers who had recently returned to their home country after being refugees for 45 years.
Gradually, both independence activists and returnees from abroad left politics. Some of them went into business, some into foreign service, representing the country abroad. Some became judges. They were replaced by a new type of politicians, exemplified by Andris Skele. While other people were active in the independence movement, he accumulated a substantial wealth privatizing the companies in the food industry and then became the prime minister in 1995. Some of the newcomers were wealthy, like Skele. Others were career bureaucrats, who had risen through ranks. Unlike the intellectuals of late 1980s, they did not inspire passion. Rather, they would manage the country pragmatically. To everyone's benefit, so they said. To their own benefit, according to their critics.
Over the last years, some of our activists from late 1980s and early 1990s have been returning to a more active role. And, typically, they are taking a stand against the generations of politicians which replaced them. Sandra Kalniete, Girts Kristovskis, Marina Kostenecka, Aivars Endzins... they all signed the petition calling people to protest against the current government. There's also a lot of Latvian American (Canadian, Australian, etc.) returnees among the signatures.
I don't know where this is going to lead. But it certainly does not look like a " business as usual" of the type we have seen over the last 8 years. The change is in the air.
When I look at the list of people who signed in support of Tautas Sapulce, last week's anti-government gathering, it feels a bit like in year 1988.
In the summer of 1988, the Latvian independence movement started. It was mainly started by intellectuals: writers, artists, journalists. Then more people joined. The new independence activists came from all walks of life. In 1991, Latvia won independence. By 1993, some of Latvian Americans, Latvian Australians, Latvian Germans came back to their home country and joined the politics. At one point, our government had 5 ministers who had recently returned to their home country after being refugees for 45 years.
Gradually, both independence activists and returnees from abroad left politics. Some of them went into business, some into foreign service, representing the country abroad. Some became judges. They were replaced by a new type of politicians, exemplified by Andris Skele. While other people were active in the independence movement, he accumulated a substantial wealth privatizing the companies in the food industry and then became the prime minister in 1995. Some of the newcomers were wealthy, like Skele. Others were career bureaucrats, who had risen through ranks. Unlike the intellectuals of late 1980s, they did not inspire passion. Rather, they would manage the country pragmatically. To everyone's benefit, so they said. To their own benefit, according to their critics.
Over the last years, some of our activists from late 1980s and early 1990s have been returning to a more active role. And, typically, they are taking a stand against the generations of politicians which replaced them. Sandra Kalniete, Girts Kristovskis, Marina Kostenecka, Aivars Endzins... they all signed the petition calling people to protest against the current government. There's also a lot of Latvian American (Canadian, Australian, etc.) returnees among the signatures.
I don't know where this is going to lead. But it certainly does not look like a " business as usual" of the type we have seen over the last 8 years. The change is in the air.
Thursday, November 08, 2007
Latvian inflation at 13.2%
Central Statistic Bureau reports that inflation reached 13.2%/year in October 2007. In comparison, it was 10.1%/year in August and 8.2%/year in May. It looks like we're in a nasty inflationary spiral.
This is beating the worst expectations. A few months ago, then-still-a-minister Aigars Štokenbergs predicted that the inflation will reach 14-15%/year by the end of 2007. I didn't believe him back then but now... the reality may be even worse by December.
The trend is similar across many Eastern European countries. Estonia has inflation of 8.5%/year now, up from 5.7%/year in August. The Latvian numbers are, however, one of the worst... and I've no idea when this spiral will end.
UPDATE (a few hours later): Parex Asset Management is trying to calm the people by pointing out that the usual beginning-of-heating-season increase in heating costs came one month early this year. As a result, October's yearly inflation numbers include two once-a-year heating price increases, one from November 2006 and another from October 2007. Good point, but even adjusting for that only decreases 13.2%/year to 12.7%/year.
And, if today's dinner bill is an indication, the inflation has not made my friends to spend less. Quite the contrary.
This is beating the worst expectations. A few months ago, then-still-a-minister Aigars Štokenbergs predicted that the inflation will reach 14-15%/year by the end of 2007. I didn't believe him back then but now... the reality may be even worse by December.
The trend is similar across many Eastern European countries. Estonia has inflation of 8.5%/year now, up from 5.7%/year in August. The Latvian numbers are, however, one of the worst... and I've no idea when this spiral will end.
UPDATE (a few hours later): Parex Asset Management is trying to calm the people by pointing out that the usual beginning-of-heating-season increase in heating costs came one month early this year. As a result, October's yearly inflation numbers include two once-a-year heating price increases, one from November 2006 and another from October 2007. Good point, but even adjusting for that only decreases 13.2%/year to 12.7%/year.
And, if today's dinner bill is an indication, the inflation has not made my friends to spend less. Quite the contrary.
Wednesday, November 07, 2007
Latvia, Estonia, real estate
Estonian blogger Davix has some interesting graphs on apartment prices in Tallinn, Estonia. The overall trend is the same as in Latvia: the prices peaked in Spring and are now slightly more than 10% off the peak prices.
The trend did not surprise me, but the numbers did. From the graph, the October price looks around 1490 Euros/m2 which is the same as Latio's estimate for Riga, except that... Latio's numbers is average of old (Soviet era) apartments while Davix averages Soviet era apartments and (more expensive) new construction.
So, if one did apples-to-apples comparison (which I can't do because I don't have Estonian statistics separated by time of construction), Tallinn apartments will probably be about 20% cheaper than Riga. At the same time, Latvian salaries are 25% below the Estonian ones.
And Estonians are still complaining about the housing bubble. If they have a bubble, Latvia has a mega-bubble!
The trend did not surprise me, but the numbers did. From the graph, the October price looks around 1490 Euros/m2 which is the same as Latio's estimate for Riga, except that... Latio's numbers is average of old (Soviet era) apartments while Davix averages Soviet era apartments and (more expensive) new construction.
So, if one did apples-to-apples comparison (which I can't do because I don't have Estonian statistics separated by time of construction), Tallinn apartments will probably be about 20% cheaper than Riga. At the same time, Latvian salaries are 25% below the Estonian ones.
And Estonians are still complaining about the housing bubble. If they have a bubble, Latvia has a mega-bubble!
Monday, November 05, 2007
Is Latvia like US now?
David Brooks, one of my favorite New York Times columnists, had a recent column in which he wrote:
At the same time, our political elite looks increasingly dysfunctional. It's hard to find anyone who trusts Kalvitis' government. Opposition does not look much better - if New Era Party was capable of convincing people that they can govern better, they would have won the last election. Right now, if "none of the above" was an option on Latvian ballots, it would win the election - by a large margin.
American voters are generally happy with their own lives. [...] Researchers from Pew found that 65 percent of Americans are satisfied over all with their own lives — one of the highest rates of personal satisfaction in the world today.The political issues in Latvia are very different from US but it feels exactly the same way. Most of people whom I meet are happy with their lives. Typically, they are better off than they were 5 or 10 years ago.
On the other hand, Americans are overwhelmingly pessimistic about their public institutions. That same Pew survey found that only 25 percent of Americans are satisfied with the state of their nation.
At the same time, our political elite looks increasingly dysfunctional. It's hard to find anyone who trusts Kalvitis' government. Opposition does not look much better - if New Era Party was capable of convincing people that they can govern better, they would have won the last election. Right now, if "none of the above" was an option on Latvian ballots, it would win the election - by a large margin.
Saturday, November 03, 2007
Tautas sapulce
Today is the big public gathering (Tautas Sapulce) in Doms' square to protest against political corruption in Latvia and the present government. Aleks will probably have a first hand report from there when it's over. A few of my colleagues also planned to go there.
I watched it for a while on TV. It was quite impressive. Doms' square looked full and TV reported 8,000-9,000 participiants. It was snowing (Latvia is having first snow this morning) and cold but people were there, mostly under umbrellas, to express their unhappiness with the Latvian government.
It was quite unlike anti-government protests in other countries. Several choirs have come to the protest and short speeches by public figures alternated with collective singing of Latvian songs. It looked very peaceful and, unlike with protests in many other countries, it was absolutely clear that this protest will never turn into a riot. Yet, people were quite resolved and firm that our government must change.
When listening to speeches by opposition politicians, we wondered: will they actually be better? My family has never been Kalvitis' fans. Yet, today they ended up chuckling at the opposition speakers. There is a gap between speaking eloquently about how moneyed interests are having too much influence on Latvian politicians... and actually being able to govern better. Our opposition has a lot of the first skill. But they have not convinced us about the second. And when I see Latvian opinion polls that show New Era (the main opposition party) at 11.2% of public support, despite the unpopularity of Kalvitis' government, I conclude that a lot of Latvians feel the same way.
I watched it for a while on TV. It was quite impressive. Doms' square looked full and TV reported 8,000-9,000 participiants. It was snowing (Latvia is having first snow this morning) and cold but people were there, mostly under umbrellas, to express their unhappiness with the Latvian government.
It was quite unlike anti-government protests in other countries. Several choirs have come to the protest and short speeches by public figures alternated with collective singing of Latvian songs. It looked very peaceful and, unlike with protests in many other countries, it was absolutely clear that this protest will never turn into a riot. Yet, people were quite resolved and firm that our government must change.
When listening to speeches by opposition politicians, we wondered: will they actually be better? My family has never been Kalvitis' fans. Yet, today they ended up chuckling at the opposition speakers. There is a gap between speaking eloquently about how moneyed interests are having too much influence on Latvian politicians... and actually being able to govern better. Our opposition has a lot of the first skill. But they have not convinced us about the second. And when I see Latvian opinion polls that show New Era (the main opposition party) at 11.2% of public support, despite the unpopularity of Kalvitis' government, I conclude that a lot of Latvians feel the same way.
Thursday, November 01, 2007
October real estate numbers
The Latvian real estate bubble kept deflating in October, with apartment prices down another 2%, to 1490 Euros/m2, according to Latio real estate agency. The prices are now 13.5% below the peak of 1720 Euros/m2 reached in April. However, they are still 6% higher than one year ago (October 2006).
The new construction is slowing down and only one new project in Riga has been announced in September. Other real estate agencies report similar trends.
The new construction is slowing down and only one new project in Riga has been announced in September. Other real estate agencies report similar trends.
Wednesday, October 31, 2007
VVF's new job
Four months ago, Vaira Vīķe-Freiberga finished her second term as the Latvian president (probably, she was the best Latvian president ever and most of Latvia was sad to see her go). But VVF did not stay retired for long.
Vaira Vīķe-Freiberga is now the new president of European Research Area Board, a group of experts that will advise EU on scientific research and make policy suggestions to European Commission. It's an advisory role but an important one.
While looking for information on her new appointment, I came across similarly-named
European Research Council which distributes EU funding for research. Their website has the preliminary results of their first grant competition. Latvia did not do well at all and, even in terms of submitted grant proposals, we were the last.
Latvian governments did underfund research quite badly for 12-15 years (from Godmanis government in early 1990s until a few years ago) and we are still seeing the consequences of that. Things have been changing for better in the last few years (I hope the next government continues that) but it will take a while to undo the damage from 12-15 years of underfunding.
Vaira Vīķe-Freiberga is now the new president of European Research Area Board, a group of experts that will advise EU on scientific research and make policy suggestions to European Commission. It's an advisory role but an important one.
While looking for information on her new appointment, I came across similarly-named
European Research Council which distributes EU funding for research. Their website has the preliminary results of their first grant competition. Latvia did not do well at all and, even in terms of submitted grant proposals, we were the last.
Latvian governments did underfund research quite badly for 12-15 years (from Godmanis government in early 1990s until a few years ago) and we are still seeing the consequences of that. Things have been changing for better in the last few years (I hope the next government continues that) but it will take a while to undo the damage from 12-15 years of underfunding.
Monday, October 29, 2007
September Latvian credit market numbers
The numbers on Latvian home loans for September 2007 have been published and they confirm the trend observed in my previous post. In September, Latvian banks issued 64.9 mln lats of new home loans, 19.5% less than in August and less than a half of what the monthly amount used to be up to June 2007 (140-170 mln lats per month):
People in real estate business are already complaining and referring to government's anti-inflation plan as "home construction industry destruction plan". I think the decrease is mainly due to management decisions by Latvian banks (which must be under a strong pressure to decrease lending, after all the negative information about Latvia in international financial press) rather than the anti-inflation plan. But decreasing the amount of new loans by a half can be devastating to the construction industry, no matter what the causes of this decrease are.
Also, if the trend continues, expect a strong slowdown in the rest of Latvian economy. Decreasing the available credit this quickly, by so much, has to have a strong impact. A substantial fall in home prices (beyond the 14% decline that has already occured) and an impact on a lot of other things, as well.
People in real estate business are already complaining and referring to government's anti-inflation plan as "home construction industry destruction plan". I think the decrease is mainly due to management decisions by Latvian banks (which must be under a strong pressure to decrease lending, after all the negative information about Latvia in international financial press) rather than the anti-inflation plan. But decreasing the amount of new loans by a half can be devastating to the construction industry, no matter what the causes of this decrease are.Also, if the trend continues, expect a strong slowdown in the rest of Latvian economy. Decreasing the available credit this quickly, by so much, has to have a strong impact. A substantial fall in home prices (beyond the 14% decline that has already occured) and an impact on a lot of other things, as well.
Thursday, October 25, 2007
(Rare) praise for Kalvitis government
Yesterday's Financial Times had a half-page article on Page 2 about Latvia's political situation. It had a large picture of last week's protest near parliament, a summary of issues around Loskutovs and other things one would expect.
What surprised me was this evaluation of Kalvitis' government policies on inflation and economic overheating, by David Orchard of Moody's rating agency:
What surprised me was this evaluation of Kalvitis' government policies on inflation and economic overheating, by David Orchard of Moody's rating agency:
They have done enough. For many years it was all talk and no action. Finally they are doing something.It coincides with what I think. After a massive criticism from both Latvian press and international financial organizations, Kalvitis' government is starting to get its economic policies right. In a month or two, Kalvitis will likely be gone and Latvia will have a new government. I hope the new government keeps doing the right things, as far as economy is concerned.
Monday, October 22, 2007
The end of the Eastern European housing bubble?
The Latvian housing bubble has been one of the main topics on this blog recently. By now, the bubble seems to be over. The apartment prices have declined 14% in last half year and are still falling.
According to Irish Independent, the same thing has happened in most of Eastern Europe. Latvia, Estonia, Lithuania, Poland, Hungary, Bulgaria... all those countries have their housing prices falling. And some Irish investors are having problems because of that...
According to Irish Independent, the same thing has happened in most of Eastern Europe. Latvia, Estonia, Lithuania, Poland, Hungary, Bulgaria... all those countries have their housing prices falling. And some Irish investors are having problems because of that...
Thursday, October 18, 2007
Morten Hansen to blog at L-Diena...
Here is his blog. Morten Hansen, who teaches at Riga branch of Stockholm School of Economics, is one of best experts on Latvian macroeconomics. Should be interesting...
In his first post, Hansen describes Latvia as the "most interesting economy in the EU these days". I interpret "interesting" as "could end up well, could end up not so well". Economies with problems are not interesting and obvious disasters are not interesting, either.
The whole L-Diena set of business and economy blogs is getting better and better. I recommend it for any economy-interested readers who read in Latvian. (Morten Hansen is the only English language blogger there so far...) And, if L-Diena could add RSS feeds, it would be even better...
In his first post, Hansen describes Latvia as the "most interesting economy in the EU these days". I interpret "interesting" as "could end up well, could end up not so well". Economies with problems are not interesting and obvious disasters are not interesting, either.
The whole L-Diena set of business and economy blogs is getting better and better. I recommend it for any economy-interested readers who read in Latvian. (Morten Hansen is the only English language blogger there so far...) And, if L-Diena could add RSS feeds, it would be even better...
Tuesday, October 16, 2007
US embassador speaks out
US embassador to Latvia, Catherine Todd Bailey gave a speech at the University of Latvia today, on the shared values of Latvia and US and the current corruption issues in Latvia. I'm too busy to write about it in detail... but here is the text of the speech.
The usual suspects in Latvian media and politics have already started spinning it, by cherry-picking quotes to fit their view of the world, or making up arguments why the speech is not relevant. Read the speech instead of reading their reports. Or read both and contrast them. (At least one quote that is going around in Latvian language media is a very loose translation of the original.)
The usual suspects in Latvian media and politics have already started spinning it, by cherry-picking quotes to fit their view of the world, or making up arguments why the speech is not relevant. Read the speech instead of reading their reports. Or read both and contrast them. (At least one quote that is going around in Latvian language media is a very loose translation of the original.)
Sunday, October 14, 2007
Swedbank (owners of Hansabanka) downgraded
Forbes reports:
Hansabanka has already cut the amount they issue in Latvian home loans 5-10 times. This downgrade means they are unlikely to increase it back soon (even if the Latvian government relaxes its restrictions on lending). So, housing prices are not going to rebound in the next few months. And cutbacks of this scale imply that we might see a very substantial slowdown in Latvian economy in general.
Developing...
Deutsche Bank has downgraded Swedbank to 'hold' from 'buy' with a maintained target of 239 skr, citing the increased risk of a hard landing in the Baltic economies and especially in Latvia.In a note to clients, Deutsche Bank said Swedbank's management have reacted too late and have few tools to manage the economic slowdown in Latvia, especially as it believes inflation there will be above 10 pct into 2008.
Swedbank owns Hansabank, the largest banking group in the Baltics, and is at risk from a possible devaluation of Latvia's currency, the lat.
Hansabanka is Latvia's largest bank and has issued 3.65 bln lats (5.2 bln euros) in credits (27.7% of all bank credits in Latvia). With lat/euro exchange rate fixed and money flowing freely between Latvia and abroad, the Bank of Latvia has essentially lost control over the fiscal policy in Latvia. Hansabanka and other major Scandinavian-owned banks (SEB, Nordea, DnB Nord) are the ones who determine it.
Until the beginning of this year, Hansabanka was lending loosely, with more than half of its loans being financed by money from abroad (e.g., its owner, Swedbank). This contributed to the housing bubble and Latvia's huge current account deficits. Then, the financial analysts started getting worried and now Hansabanka is under pressure to cut back.Hansabanka has already cut the amount they issue in Latvian home loans 5-10 times. This downgrade means they are unlikely to increase it back soon (even if the Latvian government relaxes its restrictions on lending). So, housing prices are not going to rebound in the next few months. And cutbacks of this scale imply that we might see a very substantial slowdown in Latvian economy in general.
Developing...
U.S. visas: a positive experience
Several times, I have written about the problems that Latvians (and other Eastern Europeans) have with obtaining US visa when they want to travel to United States. I have heard many stories of Latvians who have been refused US visa for no good reason. Both from my friends and from newspapers. (I've read that Latvian hockey star Martins Karsums could not obtain visa when he first wanted to play in US in 2002.)
I went to US embassy in Riga a few days ago, to apply for a visa for a short work trip to US. I had a better experience. Everyone was polite. I had my visa the next day. Unlike in 2002, I did not see anyone else being treated unfairly.
Maybe, the times are changing. In the last year, only 1.33% of Latvian visitors to US illegally overstayed their visa. The remaining 98.67% should not be treated with suspicion when they come to US embassy to apply for visa. And US embassy in Latvia may have understood that.
I went to US embassy in Riga a few days ago, to apply for a visa for a short work trip to US. I had a better experience. Everyone was polite. I had my visa the next day. Unlike in 2002, I did not see anyone else being treated unfairly.
Maybe, the times are changing. In the last year, only 1.33% of Latvian visitors to US illegally overstayed their visa. The remaining 98.67% should not be treated with suspicion when they come to US embassy to apply for visa. And US embassy in Latvia may have understood that.
Funny news story
The city of Riga buys 120 cell phones from a company named "Bīstamie sakari" (translation: "Dangerous affairs" or "Dangerous communications"). I hope the cell phones don't turn out to be dangerous.
Thursday, October 11, 2007
Notes from Latvia
Some observations from a few weeks back in Riga:
- Traffic is much worse. 5 years ago, I could get home without traffic jams easily. Not any more.
- Same about (intercity) buses and trains. In July, Aleks had a post on how he spent 3 hours standing on overfull bus from Riga to Ventspils. I thought "he had an extraordinarily bad experience". No, I now have to think carefully which bus to take... so that I don't end up with a similar experience myself.
- Everyone is complaining about inflation being at 11%... but it seems that people are spending more rather than less. They are driving more, travelling more and so on...
- It looks like Riga has substantially more small children than a few years ago. In a future post with numbers, I'll discuss what is happening to Latvian birthrates...
Bank of Latvia is becoming worried...
about the state of the credit market. As I wrote a few days ago, Latvian banks have cut the amount of home loans that they issue by a half in last few months.
The chairman of Bank of Latvia, Ilmars Rimsevics, just said the following:
The chairman of Bank of Latvia, Ilmars Rimsevics, just said the following:
- Bank of Latvia is watching the slowdown in new credits;
- If the slowdown is too fast, it may damage the Latvian economy;
- In that case, Bank of Latvia may consider relaxing the restrictions on new lending.
Saturday, October 06, 2007
August credit market numbers
Beside housing prices, I have been following another housing related statistic: increase in home loans issued by Latvian banks. Over the last two months, the change has been quite dramatic:
In August, Latvian banks added 78.182 million lats to their home loan portfolio. In contrast, they issued about 170 million lats of new loans per month in the beginning of this year.
As I argued in one of my previous posts, the Latvian housing boom has been largely fueled by readily available credit. In the past few years, the Latvian banks were increasing their home loan portfolios agressively, by 80% a year. Easier credits enabled people to pay larger amounts for apartments and houses, increasing housing prices by 60% a year.
Now, this process may have come to end. Judging the by graph above, a very abrupt end, with banks issuing only half as many loans as they used to a few months ago. (And, according to Latio, the former market leaders, SEB and Hansabanka are issuing 5-10 times less home loans than they used to.) There's less credit available and, if the trend persists, people will be unable to buy apartments and houses at the current prices. Sellers will be unable to sell and may have to postpone the sale or sell for less.
The decline in available credit has been much more abrupt than I thought. (And, given the subcrime credit scare in US and its impact of the world financial market, it may get even worse.) The impact of that on the Latvian housing prices and broader Latvian economy remains to be seen. Developing...
In August, Latvian banks added 78.182 million lats to their home loan portfolio. In contrast, they issued about 170 million lats of new loans per month in the beginning of this year.As I argued in one of my previous posts, the Latvian housing boom has been largely fueled by readily available credit. In the past few years, the Latvian banks were increasing their home loan portfolios agressively, by 80% a year. Easier credits enabled people to pay larger amounts for apartments and houses, increasing housing prices by 60% a year.
Now, this process may have come to end. Judging the by graph above, a very abrupt end, with banks issuing only half as many loans as they used to a few months ago. (And, according to Latio, the former market leaders, SEB and Hansabanka are issuing 5-10 times less home loans than they used to.) There's less credit available and, if the trend persists, people will be unable to buy apartments and houses at the current prices. Sellers will be unable to sell and may have to postpone the sale or sell for less.
The decline in available credit has been much more abrupt than I thought. (And, given the subcrime credit scare in US and its impact of the world financial market, it may get even worse.) The impact of that on the Latvian housing prices and broader Latvian economy remains to be seen. Developing...
Friday, October 05, 2007
Latvian political scandals getting stranger every week...
Two weeks ago, Indulis Emsis resigned as the Speaker of the Latvian parliament, opening the way for a completely unknown person named Viesturs Daudze. We are now learning more about the scandal that lead to Emsis' resignation and it gets more and more bizarre...
As most Latvians know by now, the story started in October 2006 when Emsis got his briefcase stolen in the parliament building. According to Emsis, he had 10,000 US dollars in cash in that briefcase. The investigators found out that the briefcase was stolen by a waiter from the parliament cafe. But, instead of 10,000 dollars, they recovered only 6,000.
Emsis changes his testimony and says that he only had 6,000 dollars in the briefcase. (He now claims that he did that so the case would get to the court more quickly - and he could at least get 6,000 of his dollars back more quickly.) Prosecutor's office is not happy about him giving contradictory testimony. They conclude Emsis has lied under oath at least once and start a criminal investigation against him - for perjury. Emsis resigns.
It all sounds strange to me. A major politician changing testimony just to get 6,000 dollars back a few months early? Prosecutor's office prosecuting someone for what looks like a minor change in what they said? (Or is there something else that Emsis is not saying?) This scandal (and other things that are happening in Latvia right now) is leaving me more and more puzzled...
As most Latvians know by now, the story started in October 2006 when Emsis got his briefcase stolen in the parliament building. According to Emsis, he had 10,000 US dollars in cash in that briefcase. The investigators found out that the briefcase was stolen by a waiter from the parliament cafe. But, instead of 10,000 dollars, they recovered only 6,000.
Emsis changes his testimony and says that he only had 6,000 dollars in the briefcase. (He now claims that he did that so the case would get to the court more quickly - and he could at least get 6,000 of his dollars back more quickly.) Prosecutor's office is not happy about him giving contradictory testimony. They conclude Emsis has lied under oath at least once and start a criminal investigation against him - for perjury. Emsis resigns.
It all sounds strange to me. A major politician changing testimony just to get 6,000 dollars back a few months early? Prosecutor's office prosecuting someone for what looks like a minor change in what they said? (Or is there something else that Emsis is not saying?) This scandal (and other things that are happening in Latvia right now) is leaving me more and more puzzled...
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