Latvia seeks help to survive economic turmoil

Latvia's Prime Minister has announced he’s ready to step down if it helps improve the situation in the country. Meanwhile the country’s capital is dealing with the aftermath of Wednesday’s riots.

It’s peaceful and quiet now on the streets of Riga and only a few broken windows remind of the recent events.

More than 10,000 people took to the streets, demanding parliament resign. Angry protesters clashed with police and over turned.

Policeman Angris Suna also was at the demonstration, but this time as a protester.

“They may lead us to a point when we can become simply deaf and blind. Of course, we will not throw the bottles, rocks or pistols, but if they treat us like that, how long can we bear it?” he says.

He says from the 1990s the number of police has been cut by half and the government plans even further reductions. His salary has shrunk by 20% and he has lost most of his social benefits.

Until recently, Latvia had one of the fastest growing economies in Europe. But in a blink of an eye it has caught a severe financial cold, and facing bankruptcy had to beg the international community for help.

And the remedy of a 7.5 billion Euro package came from the World bank, the IMF and the EU. But there is a price to pay. As part of the bailout deal Latvia will have to cut jobs and salaries in the public sector and increase Value Added Tax from the current 18 to 21 per cent.

But the finance ministry said it would be able to repay the debt since the money was offered at a very low rate – just 4%.

“It’s brilliant that we got this access to this very cheap money today, we will need to start to repay these loans starting in 2012, therefore the economy will be changed and some part of this sum will be repaid later,” Sanita Bajare an expert of Latvian finance ministry says.

While the government is negotiating with international funds, businessman Andris Zhiganov is trying to secure finds in Russia, sending this petition to billionaire tycoon Roman Abramovich: “We are asking you to consider buying Latvia. Hardworking people, ecologically clean area and lots of parking space for your yacht.”

And even though he says so far there has been no answer from Abramovich, he thinks the letter has done its job, it drew people’s attention to the situation in Latvia and the incompetence of its government.

“They started to cut the salaries of clerks, firing policemen, trying to show – here we are doing everything to stabilize the economy but at the same time they spent 10 million Euros on the design of a concert hall,” Zhiganov says.

And even though the finance ministry says the economy is now on the right track, many economists warn that worse is yet to come.