RIGA — The European Commission’s top representative in Latvia, Iveta Šulce, lashed at critics of the economic recovery program and Brussels’ efforts to bring Latvia’s fiscal policy in order.
“You have to understand — Latvia in reality is only functioning with the help of international loans. The government is spending more than it is making,” Šulce told the Latvijas Avize newspaper in an interview published Thursday. “It’s in your interest to spend as little money as possible, since you will have to pay it back,” she said.
“Let me remind you — we’re not asking anything. It’s Latvia’s government that is asking,” she said in defense of the European Commission’s actions and decisions vis-à-vis the Baltic state. “The truth is that for the first time in its history the European Union has to cope with the insolvency of three of its 27 member states — Latvia, Romania and Hungary.”
The interview, coming two days after the European Union’s budget and financial affairs commissioner Joaquín Almunia was in Riga, was a stinging rebuke to Latvians for the budgeting errors made in recent years and the difficult choices it now faces. What’s more, Šulce’s words were a reminder for who’s to blame for the crisis.
“Listening to these discussions — to cut [expenditures], or not to cut — I have to counter-questions. First, why isn’t anyone asking why a country and EU member state that has received enormous aid doesn’t have money at all? Where is this aid and how has it been invested?” she said. “Second, it’s easier to create the image of an enemy rather than risking one’s reputation and take responsibility for the difficult decisions. It’s clear that people are having a tough time now, and it’s going to get worse before it’s gets better.”
The European Commission has insisted that Latvia fulfill its promise to consolidate next year’s budget by 500 million lats (€700 million) through a combination of expenditure cuts and tax increases despite the pain this will cause. The firm stance has naturally generated criticism, particularly from two ruling coalition parties that signed onto the deal in July — the People’s Party and the Union of Greens and Farmers. There is enormous political risk for the parties that have supported the austerity measures, since voters are unlikely to forget come parliamentary elections next October. And since for all intents and purposes the pre-election campaign has begun, some politicians have been quick to blast the loan program.
“The result that we have today is the Latvian state’s sovereign choice — and the chosen model was a mistake,” said Šulce. “It’s important to draw conclusions about the mistakes allowed in the past years, and one of them was to spend money that wasn’t earned. Foreign investment flowed into the country, but it wound up in the real estate sector, and now the ship has sunk.”
Finance Minister Einars Repse said earlier this week that it’s possible Latvia won’t need to spend to entire loan amount.
