As Ambrose Evans Pritchard recently wrote in the Telegraph, there are some real parallels emerging between the financial crises of Latvia and Argentina. On the subject of Argentina, he reminded readers (our emphasis):
Yet Argentina span out of control very fast in December 2001 when President Fernando de la Rua stopped cash withdrawals from banks. There was a national strike. Co-ordinated mobs stormed supermarkets.
On the 17th, de la Rua ordered a 20pc cut in public spending. (Like cuts just passed by Latvia’s parliament). It set off three days of rioting fanned by Peronist agitators. De la Rua declared an emergency. The army refused to act without backing from congress. Police lost control. Some 27 people were killed on the 20th.
Trapped in the Casa Rosada by furious crowds, De la Rua fled in an air force helicopter. After five presidents in two weeks, Argentina ended a half-baked dollar union that had lured its people into a debt trap. Dollar mortgages ? 90pc of home loans ? were switched into pesos by decree. Foreign creditors received a 70pc haircut.
And now consider the following report from Dow Jones on Thursday:
Several thousand people gathered in the Latvian capital Riga to protest severe government spending cuts made earlier in the week, the Baltic News Service reports Thursday. The rally, organized by the Latvian Free Confederation of Trade Unions, is heavy on police and pensioners, who stand to see their retirement pay reduced by 10% as the country tightens its budget by EUR700 million.
Addressing the crowd, Confederation leader Peteris Krigers urged the policymakers responsible for the country’s demise to take personal responsibility for their actions. “The people who lead the country to bankruptcy need really answer for this,” said Krigers. “So far we have been too composed and too understanding.”
The Confederation has billed the gathering as a “peaceful manifestation” of widespread public displeasure, but there are fears of violence similar to that seen after a protest in January, which followed a first attempt by lawmakers to get this year’s budget in order. Latvia’s economy is expected to decline some 20% this year and continue downward in 2010. The country desperately needs the second tranche of its International Monetary Fund-led EUR7.5 billion emergency loan, taken in December, to keep from going bankrupt and devaluing its euro-pegged currency.
Okay, we’re not saying that’s quite the situation in Riga yet but surely it does mark a clear souring of public sentiment.
This, by the way, is what happened back in January the first time round the government tried to impose budgetary cuts, and actually failed:
Related links:
Crisis averted; Latvian central bank buys euros - FT Alphaville
Latvian bond failure begins - FT Alphaville
A Baltic quagmire, continued – FT Alphaville