The fog around the policy of the Latvian government in the financial sphere is so dense that it is certainly not possible to say something. Negotiations with the European Commission and the IMF on the granting of the next tranche were held behind closed doors, and only after they were completed the Latvian telegraph agency LETA managed to find an unofficial text of the agreement, according to which even more difficult times await Latvia.
Personal income tax will be increased, including through the introduction of taxes on capital gains and residential real estate, the value of which will be determined by its cadastral value. Abolish tax discounts for farmers. The indexation of pensions will be frozen. At the same time, an increase in VAT from 21% to 23% is expected. The Government of Latvia also undertakes, if necessary, to implement other measures aimed at increasing revenues to the budget through taxes.
At the end of July, the citizens of the country were shocked by the government’s plans to reduce to 70% the financing of medical institutions, to close the 1st Riga hospital (ambulance) and the State Skin and Venereal Diseases Dispensary, as well as the network of regional hospitals and polyclinics. The population ceases to purchase durable goods: everything goes to food. Such social dampers as public works, the system of social housing is simply absent.
Today, Latvia has become the “weakest link” in the European economy, the rupture of which can lead to an avalanche-like reaction of state bankruptcies in Eastern Europe. Obviously, it is on this basis that the positions of the EU and the IMF diverge. For United Europe, it is impossible to prevent the collapse of a EU member state, while the IMF is most interested in the purely financial side of the issue, and it may not give money.
It cannot be said that, in addition to tightening fiscal policy, nothing is being done in Latvia to remedy the situation. In particular, on the July days of negotiations with the IMF, Latvia and Russia finally agreed on their positions on the elimination of double taxation. Following the third meeting of the Latvian-Russian intergovernmental commission, a protocol was signed, which includes economic, transport and humanitarian issues.
It also includes items on investment protection, transit development and tourism.
The rapprochement with Russia, one of the most important economic partners of Latvia, began only because of the critical situation in which Riga found itself.
However, this breakthrough in bilateral relations is still very far away.
A vivid evidence that all good undertakings in this area can be torpedoed is the reaction of the Latvian nationally-oriented elite to the election of the Russian-speaking mayor of Riga as a threat to the “state ideology” that has developed in the country.
In the same way, the political establishment reacts to any form of economic cooperation with Moscow, fearing “dependence” on an unfriendly state.
Today’s problems of the Baltic States in general and Latvia in particular are presented as a repetition of a long history at a new level. In the early 1980s, the leadership of the USSR, which had generously supported developing countries for decades, declaring entry into the socialist path of development, began to realize that no financial investment could transfer the feudal state to a new reality. The Soviet satellites, having ceased to receive assistance, instantly slipped to their original state. It is possible that Western Europe has made a similar mistake regarding the Baltic countries. It is impossible for Estonia, Latvia and Lithuania to pass through the stages of poverty and long “economic maturity”, but is it possible to politically allow the existence of “enclaves of the past” within the borders of the European Union?