One thing the financial crisis has taught the Western world is that when it comes to defending your reputation, the CEE states are masters of their game.
Who can forget their unity over evil currency speculators?
Or, Poland’s “we’re the only green bit on the map, so don’t mess with us” defence?
And Latvia’s “these people probably don’t even know where Riga is on the map” rebuttal to critics.
It’s no shock therefore that the latest swathe of bad press pertaining to Latvia would eventually solicit some sort of reaction.
This time it comes via a somewhat Ciceronian missive from Latvia’s central bank distancing itself from all government measures seeking to tear apart international mortgage agreements actively and retrospectively. As the Bank writes on its website:
On renewing confidence in the Latvian economy
7 October 2009
What the Bank of Latvia, financial and economic experts, and entrepreneurs have been warning against in recent months and weeks is happening. Another wave of distrust is beginning to roll over Latvia, potentially bringing higher interest rates, worsened conditions for entrepreneurs. Currently there are two main reasons behind such distrust and lack of confidence: the many less than clear signals associated with the process of adopting the state budget and the called for legal amendments that would limit the liability of borrower toward lender to the value of collateral.
Such a measure should have been adopted earlier, for purposes of slowing down lending, or it should be postponed: this is the most inappropriate moment possible. (It would be equally inappropriate to make such a measure retroactive.) Right now, as economic recovery is gradually coming within our reach, such a measure would not help to encourage lending; on the contrary: it would slow the recovery down.
The most serious problem, however, is that it would diminish confidence in the Latvian financial sector and Latvia’s chances for restoring its economic health. In the situation where the world’s attention is focused on us, there is a most urgent need for fixing the budget, by setting state expenditures at levels that are sustainable in the long run, and for fostering the financial stability. If this does not happen, the situation and future prospects will worsen not just for the economy as a whole but also for each of its participants: the government, banks, entrepreneurs, and the general population.
We would say that’s a very clever move from Latvia’s central bank. Just imagine the Bank of England saying anything similar about the UK government’s measures.
Oops they did.
Related links:
Defcon Latvia, again – FT Alphaville
Emerging Europe outlook: still bleak – FT Alphaville