Monday, July 25, 2011

Latvia raises its voice and takes a decision

It is not often that a country has the constitutional right to dissolve a Parliament by referendum. It is even rarer that this right is exercised. Thus the decision by the Latvian voters,to dissolve the Latvian Seima, and by a fairly substantial margin is a fairly unique set of circumstances..

But then again Latvia is a fairly unique country.

Latvia came under intense pressure as the Great Recession began- its largest domestic bank went under, and the government budget fell out of control. The result was not chaos but determination. The technocratic government of Prime Minister Valdis Dombrovskis slashed the budget, rescued the bank with the assistance of the IMF, and set about getting Latvia's economy in order. The result was a recovery nearly as rapid as the initial collapse: a classic V shaped recession.

More impressively still, the Prime Minister was able to be re-elected. Unfortunately that government was forced to rely on a disparate party: the "Greens and Farmers" which was in fact a vehicle for oligarchs, that is to say a group of Latvian businessmen who acquired great wealth in questionable ways and who had, before the recession, become dominant political figures.

In the midst of all this was the then President, Valdis Zatlers, who was widely derided as a light weight figure.

He is not derided now. His last act as President was to initiate the recall referendum. It was an all or nothing gamble, with the target of making a point against corruption in Parliament. It has succeeded perhaps even beyond the expectations of its initiator.

Latvia now faces a new election, but the leading political force is now set to be the Reform Party, founded by President Zatlers only in the past month. In combination with the Prime Minister's own Unity Party, this would be a powerful force to clean up Latvian politics (and indeed its business) and bring Latvia to the same "new Nordic" status now enjoyed by neighbouring Estonia.

There are many difficulties to be overcome, but no one can deny that the Latvian people have spoken up against the political class that has taken the voters for granted and corruptly shared the loot. It was indeed a huge gamble, but with such a big win, perhaps Valdis Zatlers can now do what his predecessors could not and work to create a fair and open politics that works for all of Latvia, not just those with the deepest pockets.


Anonymous said...

"The result was a recovery nearly as rapid as the initial collapse: a classic V shaped recession."

What are the actual growth figures? Having googled for 2 mins it seems that Latvia's gdp contracted by bonkers amounts in 08/09. Didn't manage to grow at all last year and is forecast to grow by about 3% this year. Hardly a rapid recovery...

Cicero said...

In fact, as you see, quite a respectable recovery, especially under the circs.

Anonymous said...

Hardly, gdp growth for Q1 was weaker than the UK and unemployment is over 16%. I wonder what it is like living on the dole in Latvia.