Merciless Blows of Crisis / News / News agency Inforos
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Merciless Blows of Crisis

in the Baltic countries

The world economic crisis is no respecter of countries. But in comparison with other EU countries, the crisis struck in this organization the most merciless blows to the Baltic countries.

And among the Baltics it is Latvia that suffered from the economic crises more than others, being, according to experts, in a stage of default. GDP in Latvia fell by 19.6 percent. Latvia has the highest share of shadow economy in the European Community; it is 39.4 percent of GDP. Latvian economy’s losses from business going into shadow are 5.127 billion Euros (3.6 billion lats). For comparison – in the European Community the share of shadow economy is 16.6 percent of GDP, which in terms of money makes up 1.8 trillion Euros (1.27 trillion lats). According to Eurostat, Latvia ranks second in the European Community by the number of unemployed persons – 17.4 percent (more than 132 thousand people). This is twice as high as the average level of unemployment in the European Community.

To save the country from bankruptcy, Latvia’s Government took a decision on considerable reduction in state expenditures, pension payments, reduction of hardship allowances and other expenditures in the public sector. Dozens of schools and hospitals have been closed.

The defense budget has been reduced by 30 percent. A possibility is being considered to return to compulsory military service (since January 1, 2007 there has been a professional army here). Because of crisis Latvia will not take part in ten military exercises; the first Latvian Venta–1 satellite launching is carried over March 2010, which was planned to do from a space launch facility in India in December 2009.

By reason of the Foreign Ministry’s budget reduction from $58 to $46 million, Latvia closes its consulates in St. Petersburg, Kaliningrad, Pskov (Russian Federation), as well as in Vitebsk (Byelorussia).

Latvia’s Government decided to cut the 2010 budget by 395 million Euros, in order to achieve general economy of 700 million Euros as arranged with IMF and the European Commission to get financial assistance from them to the sum of 7.5 billion Euros, which will allegedly save the county from default.

But the most important thing is that, as noted by the president of Latvia Valdis Zatlers, “in the Latvian society the moral decay is reigning, bordering on crying permissiveness and irresponsibility.” And this is already the society’s degradation.

GDP's fall by the end of the year in Lithuania is expected to be 16.5 percent. As of October 1, the unemployment rate here was 10.3 percent (222.3 thousand unemployed). The growth of the shadow economy is forecast to reach 24 percent. Since last year average wages in the country have reduced by almost a quarter and are less than 1,600 lits.

With the view of financial saving Lithuania's government reduces not only public-sector salaries, unemployment benefits, but also defense expenditures. This year the military budget will be about $430.8 million (1.02 percent of GDP), which is approximately 20 percent less than in 2008. Vilnius has to take such a step for the first time in 10 years. The result is that Lithuania found itself the last among NATO member states by military expenditures, what for the Lithuanian leadership has already received a reprimand from the alliance leadership.

GDP in Estonia fell by 16.6 percent. This republic has the second in size shadow economy among the Baltic States; it is 38.2 percent of GDP. The unemployment rate in Estonia has achieved this year 13.3 percent. The number of idle workers, workers on holidays without saving the salary, half-time workers is growing. The number of workplaces is actively reduced.

According to experts, the Baltic economies in 2010 will continue to decrease approximately by 4 percent of GDP. During the whole next year the unemployment rate will remain high: In Estonia – at the level of about 16.4 percent, its growth to 20 percent is forecast in Lithuania. And in Lithuania the unemployment rate will reach in 2010 its highest point at that.

Merciless blows of crisis, as noted above, degrade the society, create a “critical mass” of popular frustration that may bring people together for protest meetings under slogans of presidents’, parliaments’ and governments’ resignation, as it already took place last January in Riga, when Latvia’s economic disaster made thousands of people go to the streets of Riga with political requirements for the authorities. According to experts, the Baltic governments’ possibilities to reduce the “critical mass” of popular frustration, to help their economies recovery during and after crisis are limited. The Baltic leaders are mainly focused on stabilization of the situation and only afterwards – on real help to entrepreneurs.
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