Latvia teeters on brink in spite of $14bn IMF rescue

The capitalist pig has returned to Riga. Rosy-cheeked, fat and a briefcase full of workers' cash clasped between its trotters, he stares out greedily from a placard opposite the Latvian Parliament on the capital's main boulevard.

Next to the hoarding, unemployed men in balaclavas and worn anoraks huddle around a fire.

As little as two years ago, any public display of such anti-capitalist, communist-style cliches would have been considered madness in Latvia: after shedding the Soviet yoke nearly two decades ago, the country enjoyed an unprecedented economic boom. But the party is long over.

Latvians like 33-year-old Gints Berneckis have lost their faith in the Western economic model.

In common with thousands of others in Latvia, where unemployment is running at 23 per cent, he was made redundant from his job as a computer salesman last year.

"Yes, the capitalist pigs are back and they are walking off with our money and the Government is handing it to them," he scoffed.

He has been camped out with fellow demonstrators braving Latvia's worst winter in decades in a small tent city in front of the national Parliament since the beginning of the year.

"Everything is being cut. Social security, education, pensions - and people are leaving en masse," he said.

Berneckis is a member of a growing movement of Latvians driven to protest against their Government's handling of an economic crisis, which many argue is worse than that experienced by Greece.

The crisis peaked two years ago when the Latvian Government was forced to take over the country's second largest bank to prevent it from collapsing. Ever since they have teetered on the brink of bankruptcy.

Latvia applied for and was granted a €7.5 billion ($14.3 billion) rescue package from the International Monetary Fund and the European Union.

But the conditions imposed have obliged the Riga Government to usher draconian belt-tightening measures which aim to slash the budget deficit from 12 per cent of gross domestic product to 3 per cent by 2012.

Between 2005 and 2008 Latvian salaries doubled and borrowing grew by about 60 per cent each year. Both developments fuelled a huge economic bubble but in 2008 the bubble burst dramatically.

Property prices plummeted and consumer spending collapsed. Huge Swedish investments in building projects dried up and unemployment rose to the highest level ever experienced by an EU member country.

Latvia's economy shrank by nearly 17 per cent during the last quarter after retail sales dropped by a third. Yet the Government maintains it plans to introduce the euro in 2014.

"If it wasn't for the IMF and the EU, Latvia would now be completely bankrupt," said Jens Fischer, a political and economic analyst.

"But it's not like Greece - the people have seen worse times during the Soviet era and don't complain. There is also a big grey economy which remains unseen but keeps people ticking over."

- INDEPENDENT