Europe Shudders as Latvia Fights Bankruptcy Threat
Saturday, June 13, 2009 20:22
Even though Valdis Dombrovskis has been Prime Minister of Latvia for only four months, he is about to take his second pay cut. He will share the strong medicine that he is asking his fellow citizens to swallow in a desperate attempt to save the Baltic country from bankruptcy.
In less than a year of crisis management, the Government’s response has been to cut public salaries by 15%, then by a further 20% and soon, under emergency measures to secure crucial loans from the International Monetary Fund, by at least a further 15%, combined with redundancies. If it doesn’t work, economic impllosion could trigger a domino effect in Eastern Europe that would leave large EU states having to reach for their chequebooks.
Given the depth of the crisis in Latvia, where bartering is returning to some areas as cash is running out, it seems ridiculously optimistic. However, in his position, Mr Dombrovskis has to be optimistic.
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