“To understand recent history, one has to begin with the end of the Soviet occupation of Latvia in 1991,” Pavluts says tersely.
The Russians threw the Germans out of this small Baltic country in 1940 and refused to leave, using it to feed Mother Russia’s insatiable appetite for timber. When the Russians finally pulled out, the Latvians had their hard-fought freedom — and an economically gutted nation.
“In the first five years, there was a complete collapse of the economy,” Pavluts says as he paces.
Factories closed. Soviet-style apartment buildings were abandoned in mid-construction. The demand for natural resources disappeared.
Latvia had no choice but to “reorient itself” to the West, he says, pausing to stare out the window at the streets of the capital Riga, its art nouveau buildings blanketed in fresh snow.
Latvia begged to join the European Union and stopped at nothing to instantly grow the economy. The banks made credit easily available, money poured into retail stores and real estate, says Pavluts.
As the economy surged, the nation of 2.1 million people became known as the “Baltic Tiger.”
But behind the boom, voices of caution and discontent were growing louder.
Inflation was running 17 per cent, notes Pavluts.
“The policy-makers were certainly lulled into this deception that this was going to last forever. We’d catch up and converge with western economies in no time. And the people actually believed this would be the case.”
Then global markets collapsed in 2008 and the Latvian economy entered a death-spiral, contracting nearly 20 per cent after one of its three biggest banks, Parex, failed. The government rescued the bank and nearly went broke doing it. Latvia turned to the International Monetary Fund for a €7-billion loan.
“The treasury had simply run out of money,” Pavluts says.
Politically, the state was in turmoil. Latvians took to the streets to protest their declining living standards and a 20-per-cent unemployment rate. The ruling coalition collapsed and Valdis Dombrovskis was sworn in as head of a six-party coalition government in 2009.
Dombrovskis decided the only way out was to cut government programs, departments and paycheques. One-third of the civil service was fired. Those who remained — bureaucrats, teachers, even the soldiers — took 30-per-cent pay cuts.
Austerity worked.
The economy grew by 5.5 per cent in 2011 and 4.5 per cent in 2012. Christine Lagarde, the IMF’s managing director, praised Latvia last summer while at a meeting of Baltic states in Riga.
“You have pulled through. You have returned to strong growth. . . . You have lowered budget deficits and kept government debt ratios to some of the lowest in the EU. You have become more competitive in world markets through wage and price cuts. You have restored confidence and brought down interest rates through good macroeconomic policies. We are here today to celebrate your achievements.
“If we want to single out one factor for Latvia, it would be the impressive determination.”
But if you ask the people of Riga — those who lost jobs when the Russians and then businesses fled — if austerity was a success, the answer is a resounding no.
In the corner of eastern and northern Europe lie the Baltic nations of Latvia, Estonia and Lithuania. The three small, culturally distinct countries have proudly stood their ground after centuries of wars against Russian and Polish invaders.
The legacy of the Soviet occupation is seen and heard on the streets of Riga. Russian is spoken almost as frequently as Latvian and 30 per cent of those who live here are Russian nationals. The Polish government funds its own schools here.
There are few highrises in downtown Riga, and most that are here belong to the banks. The city is full of Orthodox churches and cathedrals along with a world-class array of art nouveau buildings, largely built after the ruin of World War I.
Money has returned to Riga — BMW sedans and Audi SUVs bomb down the narrow streets, past coffee shops, Italian restaurants and European fashion houses like Hugo Boss.
The new economy is being built, once again, on natural resources. Timber and wood-processing, agriculture and food products, as well as machine and electronic manufacturing, according to the CIA World Factbook. Economic growth is expected to hit four per cent again in 2013.
However, Latvia also has one of the highest levels of poverty and income inequality in the EU, according to a new paper released by the Baltic Centre for Economic Policy Studies.
As of 2010, 30.9 per cent of the population is classified as “severely materially deprived,” unable to pay utility bills, groceries or rent, says Alf Vanags, the centre’s director.
“This is the (worst) figure in the European Union,” says Vanags.
Austerity, concedes Vanags, has worked in a sense. The fiscal deficit is now 2.7 per cent of the GDP, a drastic drop from 7.7 per cent in 2010, according to CIA World Factbook figures.
“But it has been a very costly policy. We’ve put people out of work. . . . At home I have rubbish containers out in the yard. Every day, people rummage through it looking for food.”
Census figures show nearly 300,000 people have left Latvia since 2000, immigrating to other European nations to find jobs.
However, Pavluts argues the lean times are over and austerity has worked. “We’ve now had 13 quarters of growth,” he says.
When asked if the Latvian government went too far in its austerity at the expense of the poor, Pavluts angrily disagrees: “We have seen very bad times. It is in our living memories. But we are not sadomasochists.”
Irina Tihorenoka runs a soup kitchen on the outskirts of downtown, around the corner from the Bank of Latvia, the country’s central bank.
A steady stream of elderly people dressed in babushkas and old fur coats shuffle in, looking for a warm meal.
The bubbly Tihorenoka dishes out generous servings of carrots, meat, corn and potatoes along with soup to nearly 600 people a day in a room so small it only holds four picnic tables.
In 2012, the city of Riga supplied 759,250 hot meals to those with government vouchers.
The poor come to Tihorenoka with old containers in order to take warm food home. Children hardly ever come here: they are too embarrassed.
Tihorenoka listens to the woes of her regulars, but she has her own story of hardship. She is employed at the soup kitchen, but her husband, a truck driver, lives and works in Sweden. Their 32-year-old daughter moved to Spain and now picks mandarin oranges on a farm. The couple’s other daughter, 29, has a trade. She is a hairstylist, her mother says proudly through a translator.
“She earns a good salary. No complaints,” Tihorenoka says heartily. However, her daughter cannot afford the mortgage on her Riga apartment and will soon be evicted.
“The situation in Latvia is not getting any better,” she sighs. “Some people are getting aggressive. The homeless come here without proper vouchers and they demand soup. They threaten the staff.”
Tihorenoka has seen it all.
“One woman comes for soup every day for herself and her alcoholic son who beats her. Another woman comes in, every day, and she is pregnant — already she has so many children that she can’t feed. Why does she have more if she can’t feed herself?”
Natalia, 52, moves quickly down the soup line. The unemployed baker comes here regularly, eating and taking food to her 52-year-old husband.
The couple used to have a simple, happy life, even though he is disabled and unable to work. For 10 years, she worked as a baker and loved the early mornings spent making bread.
When the bake shop closed during the economic crisis, she had nothing. Now, she is on welfare, being paid 100 lats (about $190) a month. Minimum wage is considered 200 lats.
In order to collect welfare, participants have to work. She is a cook. She has one month left on the program and then she’ll be cut loose.
Once that happens, she is not sure how they will survive. But, she says optimistically, if austerity has worked like the politicians say, and if the economy is truly turning around, she hopes the bankrupt bake shop where she worked will reopen.
“I want to be a baker again,” she says as she tucks her thinning hair into her pink woollen hat and heads out into the cold.
Take a trip east out of Riga and you will see the faces of austerity.
Small cottages and worn farmhouses poke through the deep snow. They form hamlets or villages named Pededze, Aluksne, Liepna and Kuprava.
Everyone seems to be out of work. Wood stoves are used for heat — wood is free and abundant. Most houses have chickens and a couple cows to supplement paltry monthly government assistance cheques of about 35 lats.
Almost all of the young people have fled — to Italy, Germany or Spain.
In Kuprava, about 10 minutes from the Russian border, , the official unemployment rate is 20 per cent. But even municipal officers in the town of 800 admit the real figure is much higher.
Alexander Vasako has just driven home from visiting a friend.
He is unemployed and relies on a food bank to feed his family of four.
Vasako used to make his living by driving to Russia, filling up the tank in his antiquated Ford van and selling the gas back home on the black market. The tank has been modified to hold nearly 300 litres. One trip could make him 20 lats, or $40. On a good day, he’d go twice.
“Everybody in town did it,” says Vasako.
But the government closed the loophole on legal “smuggling” last year by limiting how much gas can be brought back.
“I don’t know what we will do now,” Vasako says.
There used to be a factory in Kuprava. Now it is empty. Children at the elementary school across the street use it as a play yard. Nearly a dozen low-rise apartment buildings, partially constructed and meant to lodge the factory workers, have been abandoned. Broken glass, empty vodka bottles, garbage and pieces of insulation are strewn inside the apartments.
Victor Zorin, 61, also used to smuggle gas. Now, he shovels driveways surrounding the empty apartments — for free.
A Swedish company bought a wood mill nearby and occasionally Zorin finds work there, earning 170 lats a month.
“I’m well. My daughter is here. My granddaughter. Somehow, we’ll manage,” he says, smiling.
Maruta Sare is one of the invisible poor in the town of Liepna.
The former beekeeper has lived in a dilapidated wood cabin on the outskirts of town for 50 years. She exists on a pension of 160 lats a month.
To Sare, Latvia’s new capitalist market is worse than the communist system.
“It was really good during the Soviet times. There was a hospital. Good medical care, nothing to complain about. Then it all disappeared.”
The stench inside Sare’s home — from something rotting — is unbearable. The house consists of a small sitting room and a decrepit kitchen with a wood stove.
In her barn, she keeps two cows for milk, chickens for eggs and half-a-dozen cats for company.
Her husband died years ago. Their daughter Rolita, 40, checks on her mother regularly. Rolita used to work at the post office but she has been unemployed since 2003.
All of Sare’s neighbours are elderly pensioners. They grow their own vegetables.
“Everyone is self-sufficient. Our pension is too small to buy food.”
In Aluksne, about an hour from Riga, there is a bus station, a post office and a restaurant — which qualifies it as a metropolis in these parts.
A group of Latvians of Polish descent is at the restaurant loudly drinking to their good fortune.
Most have worked recently in England. Two are employed by the Latvian government.
Kaspars Berzins grew up here, went to university and became a teacher. Unable to find a decent job after the markets crashed, he moved to England so he could start repaying his student loan. He works in a hotel.
Latvia’s austerity may be touted as a success, but he is not likely to come back.
“The situation in Latvia isn’t getting any better,” Berzins says. “Especially for a young guy who wants to build a family.”
Original Article
Source: thestar.com
Author: Tanya Talaga
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