Latvia enjoys capitalist dystopia

excerpt:

You Think Greece Has Problems?

Latvia's Road to Serfdom

By MICHAEL HUDSON and JEFF SOMMERS

February 15, 2010 "Counterpunch" -- While most of the world’s press focuses on Greece (and also Spain, Ireland and Portugal) as the most troubled euro-areas, the much more severe, more devastating and downright deadly crisis in the post-Soviet economies scheduled to join the Eurozone somehow has escaped widespread notice.
No doubt that is because their experience is an indictment of the destructive horror of neoliberalism – and of Europe’s policy of treating these countries not as promised, not as helping them develop along Western European lines, but as areas to be colonized as export markets and bank markets, stripped of their economic surpluses, their skilled labor and indeed, working-age labor generally, their real estate and buildings, and whatever was inherited from the Soviet era.

Latvia has experienced one of the world’s worst economic crises. It is not only economic, but demographic. Its 25.5 per cent plunge in GDP over just the past two years (almost 20 per cent in this past year alone) is already the worst two-year drop on record. The IMF’s own rosy forecasts anticipate a further drop of 4 per cent, which would place the Latvian economic collapse ahead of the United States’ Great Depression The bad news does not end there, however. The IMF projects that 2009 will see a total capital and financial account deficit of 4.2 billion euros, with an additional 1.5 billion euros, or 9 per cent of GDP, leaving the country in 2010.

Moreover, the Latvian government is rapidly accumulating debt. From just 7.9 per cent of GDP in 2007, Latvia’s debt is projected to be 74 per cent of GDP for this year, supposedly stabilizing at 89 per cent in 2014 in the best-case IMF scenario. This would place it far outside the debt Maastricht debt limits for adopting the euro. Yet achieving entry into the eurozone has been the chief pretext of the Latvia’s Central Bank for the painful austerity measures necessary to keep its currency peg. Maintaining that peg has burned through mountains of currency reserves that otherwise could have been invested in its domestic economy.