The following blog entry has been republished here courtesy of Failed State Latvia?.

If high EU and IMF officials could write what they really thought about Latvia’s political bardak*, the headline is how they might address Latvian Prime Minister Valdis Dombrovskis in a confidential e-mail. To be sure, neither the former MEP nor his party wewre involved in it, but basically, one of the coalition parties, the People’s Party (Tautas Partija/TP) has opted out of the letter it signed with international lenders.

That would be bad enough — the TP prevented a bill proposing a tax on housing from being moved into the legislative process in the national parliament, the Saeima. So instead of voting on some kind of tax on residential properties, there will be no vote or parliamentary discussion, essentially reneging on the promises made to international lenders to implement such a tax.

But there is more. The TP has expelled, without any hearing, the Saeima deputy and party member Dzintars Ābiķis, who voted against blocking the bill from the legislative process. He didn’t vote for raising taxes, he didn’t vote in favor of the residential housing tax, he simple voted for letting the legislature discuss, amend and put to a vote a bill drafted in an effort to comply with international lenders.

The TP has also suggested that it wants to talk to the IMF and other lenders in what very much sounds like an attempt to renegotiate a done deal, putting forth their own terms (whatever they may be). To be sure, the international lenders’ terms are harsh, they allow absolutely no spending of the loaned funds for economic stimulation (that is left to EU structural funds, which Latvia has CharlieFoxtrotted** so far). And oh yes, the TP has a bit more current voter support (around 1.7 %) than Stalin would get. Just the guys to talk on behalf of the Latvian people.

And yet that is not the end of the story. The government has drafted a budget that simply doesn’t cut spending by the amount agreed with international lenders (by around LVL 271 million instead of the required LVL 500 million).

So what is happening? EU and IMF honchos are soon descending on Riga to ask the headline question in person. The opinion, already widespread earlier — that the Latvian government is a bunch of untrustworthy, capricious fuckwits– is crystallizing even more. And that means, we may not get the next tranche of international loans no matter what anyone does. I mean, when the signature of a major coalition party amounts to goatfuck a few months later…
Where do we go then? — probably devalue the lat, print cash (could have been done earlier to spare everyone the agony of salary cuts and firings) and buy time through the winter, possibly with Dombrovskis being pushed out of office or resigning (getting off the tracks before the train hits). After that, with the TP zoonoids in charge, you can write your own black comedy…

* Russian-derived word for total chaos, literally, a honky-tonk whorehouse in chaos
** clusterfucked

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