The past two months have seen unprecedented events buffeting Latvia’s politics, and have deepened the crisis that now threatens both Latvia’s economy and normal constitutional processes.

The violence of Jan. 13, when a peaceful protest meeting was followed by street trashing and looting in Riga’s Old Town, was shocking. Latvia had never experienced such wanton violence. Political change has always come peacefully, and even in the break-up of the Soviet Union the little violence that occurred came only from Soviet forces. Now it was civilian violence. Although it was condemned by all political forces and seems to have been the uncoordinated ramblings of youth gangs, the violence brought considerable political fallout. Many observers have asked why security forces were almost absent, despite warnings of trouble. Others argued this whole incident showed how low both the government and the Saeima had fallen in public trust and authority.

The build-up to this incident is worth considering.

In December, the government was still coping with the effects of the Parex Bank bailout, begging for its own bailout from the International Monetary Fund, and facing increased hostility from an aroused public. Important decisions such as the appointment of a new head of the Corruption Prevention and Combating Bureau (Korupcijas novēršanas un apkarošanas birojs, or KNAB) were delayed. It was also struggling with its own intended reforms: nearly halving the number of government ministries to 10, reducing the large number of local government entities, and limiting government spending. And it was not helped by its own ministers. Finance Minister Atis Slakteris crashed when agreeing to give an interview on the Latvian economic crisis to financial channel Bloomberg, inexplicably conducting it in his poor English. He characterised the crisis as “Nothing special” and assured viewers that “We will be taupīgi (thrifty).”

President Valdis Zatlers, originally seen as a ruling coalition puppet, had been increasingly active in attempts to solve the political crisis, suggesting a government of national unity, trying to get all parties to support the IMF borrowing, and pressing forward with his constitutional amendments that would, inter alia, make it easier to dismiss the Saeima.

On Dec. 12, the Saeima in an all-night sitting accepted the government’s proposed stabilisation plan and IMF borrowing, savagely cutting government spending, and raising income and value-added taxes. Prime Minister Ivars Godmanis stunned many by calling this Saeima one of the strongest parliaments in Europe to be able to take such decisive action.

Godmanis’ rhetoric was again to the fore on New Year’s Eve, when in words and images that would hitherto be indelibly associated with him, he referred to the Antarctic penguins who, in the coldest winter, would lock together shoulder to shoulder in groups, helping each other to keep warm and survive. This was how Latvians needed to help and support one another in this time of financial crisis.

While a goldmine for political cartoonists, such rhetoric also brought massive dissatisfaction. As commentators wryly pointed out, the penguins protect those most vulnerable who are kept warmest in the middle, while in Latvia it is the very opposite. The wealthiest are most protected by a number of measures—for example, no capital gains tax, no progressive taxation, loopholes in how much public servants and advisors can be paid—while the increased tax burden falls most heavily on those with medium or low incomes. As a particularly obnoxious example, transport minister and chief nasty Ainars Šlesers appointed his chauffeur’s son to a position on a government board for a salary of LVL 4,000 per month (about EUR 5,500) when pensioners have to survive on a 20th of this sum. Artis Pabriks, one of the leaders of the breakaway opposition group Society for a Different Politics (Sabiedrība citai politikai, or SCP), argued that quite contrary to Godmanis’ assertions, nowhere else in Europe would a parliament take the steps the Latvian parliament had taken. Raising taxes, lowering government spending and not controlling speculation were the exact opposite of what other European governments are doing to meet the economic crisis. 

On Jan. 13, the SCP called for an evening mass meeting to show popular anger at the government and to call for a new Saeima election. The meeting passed peacefully but with largely uninspiring speeches and little resolution, to be followed by the unexpected violence. It should be said that such violence has also been seen recently in several other European countries, with Iceland and Greece to the fore, and Lithuania a few days later, but in Rīga it struck in a particular way at Latvian political culture: every previous problem, no matter how severe, had always been met by avoiding violence and believing in collective action, non-violent persistence and discipline. Now this self-belief was challenged by an anarchic alienation.

The events of Jan. 13 galvanised the president into even more action. Angrily, he called on the Saeima and government to undertake a number of actions by March 31 or he would call for the dismissal of the Saeima (if the president does this, it must go to a referendum). He wanted the speedy and transparent appointment of the KNAB director, for the coalition government to include other parties, and for the Saeima to pass several long-lingering electoral reform and constitutional amendments.

Meanwhile, others were taking matters into their own hands. Farmers were outraged by a series of blunders and lack of support from Agriculture Minister Mārtiņš Roze, who was forced to resign after they drove their tractors to Rīga. Long-standing Culture Minister Helena Demakova also resigned, citing health problems, prompting commentators to opine the rats were leaving the sinking (and penguin-led?) ship.

Yet the coalition maintained its hold on power. It adopted some electoral reforms and seems to be nearing appointment of a KNAB director, but has fudged on Zatlers’ other demands and has been inert on widening the coalition. Meanwhile some parties are trying to make political capital. The People’s Party (Tautas partija) after Jan. 13 announced it would propose a constitutional amendment—which against precedent it would try to apply to this Saeima—to allow the Saeima to prorogue itself, a measure not currently allowed. Earlier it had absolutely opposed any such move. This seems to be another attempt by a discredited party to regain some popularity. But in coalition meetings and Saeima votes the People’s Party supports the coalition.

On Feb. 5, the opposition New Era party (Jaunais laiks)—itself unable to gain much political traction as a result of the political and financial crisis—moved a long-awaited motion of no-confidence in the government. The motion eventually lost, with a bare 51 votes against (the Saeima has 100 deputies), showing the paper-thin majority the coalition still commands. However, the event was marked however by a piece of political triteness that nevertheless symbolises the current divide in Latvian politics. Just before the debate, persons unknown had left a little brightly wrapped “gift” for Godmanis at the door of the Saeima. No, it was not a bomb, but a few trinkets left by supposed admirers. In the photo coverage of the event, all cameras were glued to the scene of Godmanis, seated before the Saeima, feigning surprise and untying the dainty package. Behind him was a full battery of the oligarchic ministers, at ease, self-satisfied and in no hurry to respond to any serious political or economic crisis. Nothing special.

Latvijas Radio is on the verge of bankruptcy and the state-run television service is in tough shape, too. Users of both media should expect that the next several months will bring drastic changes to the scope and quality of programming.

Although both services have been saddled with financial troubles and political controversies during the past years, the government’s decision late last year to slash 25 percent of their financing forced both radio and TV managers to lay out some unpopular choices.

Latvijas Televīzija, for example, said it would cancel its participation in the Eurovision Song Contest and end production of the popular homemade soap opera, “Neprāta cena.” The radio service, meanwhile, suggested that it would have to trim programs and cut back on the range of its signal, especially to rural areas.

For Latvijas Radio, at least, things have very quickly gone from bad to worse.

Listeners no doubt have heard the frequent announcements—some of them a bit hyperbolic—warning that a cutback in programming threatens the ability of the public to be informed. As if to underscore the point, the radio service on Jan. 20 was called before the National Radio and Television Council (Nacionālā radio un televīzijas padome) to offer a plan that could prevent its bankruptcy in the face of at least LVL 700,000 in debt. On the same day, Aigars Semēvics, director general of the radio service, appeared to fall on his sword and announced his resignation.

Latvijas Radio and Latvijas Televīzija both receive financing from the government budget. They augment that by selling advertising time. The trouble with cutting state financing is that the difference cannot be made up by selling more advertising. In times of economic hardship, one of the first things businesses look at trimming is their advertising budgets—and that’s already happening.

Among ideas floated to stop the bleeding at Latvijas Radio are ending the Radio NABA service, dropping the Latvian Radio Choir and limiting the signals for Radio 3 and Radio 4 to just the Rīga area.

Just what and who will get the ax will be a decision left to Dzintris Kolāts, who was named Jan. 21 to take over from Semēvics. Kolāts has been head of Latvian State Radio’s news department. The National Radio and Television Council approved Kolāts on a 5-0 vote with three members, including chairman Ābrams Kleckins, abstaining. (For reasons not entirely clear but unsettling nonetheless, the council also briefly considered the controversial Edvīns Inkēns for the job. Inkēns, some readers might remember, once was a member of the Saeima and, at the same time, a television journalist—an ethical dilemma that did not seem to bother him. Among his accomplishments was “uncovering” the dubious pedophilia scandal of eight years ago that brought down a number of politicians.) The conservative opposition party New Era (Jaunais laiks) on Jan. 22 submitted a bill to the Saeima demanding the removal of Kleckins from the council, blaming him for not keeping tabs on the financial condition of Latvijas Radio. The party also wants LVL 500,000 to be transferred to Latvijas Radio from the LVL 28 million reportedly held by the Latvian State Radio And Television Centre, the state-run company that controls the country’s radio and TV transmitting facilities.

I would not want to be in Kolāts’ shoes right now. According to a report on Latvijas Radio, among options he is considering to save the service is laying off about 100 staff. The popular Radio 2 service also faces the possibility of a weaker signal.

Some of these decisions probably should have been made many months ago. Knowing it was going to face a tough year, why didn’t Latvijas Radio look at eliminating or collapsing some of its services? In a country of 2.3 million people, is it really necessary for state-run radio to provide four different national channels? If you have lost count, they are the news and public affairs oriented Radio 1; the all-Latvian music service Radio 2; the classical music service Radio 3; and the Russian-language Radio 4. Latvijas Radio also transmits Radio NABA, a college music service owned by the University of Latvia.

Between the two of them, Radio 1 and Radio 2 claim more than 30 percent of the listening audience in Latvia, according to Baltic Media Facts data. Radio 3 and Radio 4 claim about 5-6 percent. Couldn’t Latvijas Radio get by with perhaps just two channels?

Latvijas Televīzija also faces financial challenges, but not as bad as the radio service. Among its most dramatic moves—no doubt playing to the emotions of viewers—was announcing that Latvia would not participate in the Eurovision Song Contest and that production of “Neprāta cena” would come to an end.

However, fans of both shows have some hope. By not participating in Eurovision, LTV would have saved about LVL 120,000. But last week the European Broadcasting Union, which organizes Eurovision, decided to help out Latvia with a reduced participation fee, while Latvijas Krājbanka and the convenience store chain Narvesen announced they would come up with the money. The song contest will take place in May in Moscow. Only a few months ago, some commentators in Latvia were suggesting the country should not participate in Eurovision as a protest against Russia’s invasion of Georgia.

The producer of “Neprāta cena,” a soap opera set in a Latvian hotel and starring such personalities as actor Uldis Dumpis and singer Mārtiņš Freimanis, earlier this month turned to fans for financial help. The show costs about LVL 3,000 per episode to produce, Latvijas Televīzija spokesperson Ieviņa Ancena told Latvians Online. The producer is asking fans to donate one lat each in an effort to raise LVL 160,000 by the end of the month so that filming of the show may continue.

Among other measures, LTV also said it would cancel the Russian-language news program “Strana LV” and pull its correspondents from Brussels and Moscow.

This is not the first time Latvia’s two public broadcasters have been under the gun, but this is clearly the worst we have seen. Commercial broadcasters (and, in several cases, their foreign owners) would love to see the state-run media disappear so that they can divide up what’s left of the pie. A number of politicians also wouldn’t mind exerting more pressure over public broadcasters. I have lost count on how many times the heads of Latvijas Radio and LTV have changed over the years.

Latvia’s public broadcasters are a vital public service. Unlike the country’s commercial broadcasters, they are charged with telling Latvia’s story to Latvia. Sure, they could do a better job, but slashing their funding will not improve them.

The collapse started a month ago. On Nov. 8, the Latvian government announced it was taking a controlling 51 percent interest in the market-leading Parex Bank, setting off a chain of events that has now drawn Latvia deep into financial crisis.

Until then, the prevailing view of the government was that the international financial crisis that had set capitalism’s finest institutions shaking would do little harm to Latvia, which was protected by its isolation and its hitherto exemplary liberal economic management.

The month since has plunged Latvia into the abyss. The government’s involvement in Parex has deepened to around 85 percent and it is desperately looking for buyers as investors withdraw money. But other prognoses for the economy have also worsened. The budget adopted just a few months ago had already forecast a drop in the Gross Domestic Product of around 1 percent, in line with the prevailing world economic downturn in 2008. But that has been radically revised and now is likely to be nearer 5 percent, signalling a damaging economic recession and a sharp decline in government revenue. The forecast budget deficit has doubled from 1.5 to 3 percent, endangering prospects of Latvia joining the euro zone in the coming few years.

A series of backdowns and reversals on the part of Finance Minister Atis Slakteris has made ludicrous his earlier confident assertions that Latvia, unlike some other countries (such as Iceland and Hungary), would need no help from the International Monetary Fund or other international financial institutions. In mid-November the government admitted it may need to borrow around EUR 3 billion. Now the sum mentioned is EUR 5 billion, although some analysts say around EUR 7 billion is the likely figure.

The IMF or any other international benefactor will impose strict conditions on government spending in the form of a stabilisation plan. Here is the really bad news: in Prime Minister Ivars Godmanis’ address to the Saeima last week he forecast a cut in government spending of around LVL 600 million—around 11 percent of all expenditures—and predicted that it would not be possible to avoid education, health, social services and other large areas of government spending.

The politics of this will be intense. In September a huge demonstration of teachers, health workers, police, fire officers, transport workers and others in the public sector called for a halt to their relatively declining wages and a guarantee of better conditions. This widely supported action was given extra fillip by Government Auditor Inguna Sudraba, who revealed systematic abuse of payment guidelines for government bureaucrats: a system of bonuses (prēmijas) has supplemented already generous salaries. In the Transport Ministry, run by chief government head–kicker and tycoon Ainārs Šlesers, officials had had 14 bonus payments in one year! The train, tram, bus and trolley bus drivers and maintenance crews had on the other hand received no such largesse.

To some extent, the scenario in Latvia reflects that in so many other countries still trying to make sense of a vicious global economic downturn, and trying to restore confidence in financial institutions. Certainly the situation is far worse in Russia, although denied by its government. It was partly the flow of Russian money that had made Latvian banks rich, employing the extraordinary slogan “We are closer than Switzerland”!

As elsewhere, property prices have also plunged steeply in Latvia, threatening all those who had been banking, literally, on continually growing prices to cover their loans. This may bring some sanity to Latvia’s overheated property prices (why does the price of a property in Rīga approach that of one in Paris or Berlin?), but along the way will bankrupt many.

Latvia showed it was capable of its own financial crisis nuances: in a move that caught the attention of the international press, Latvian security police brought in for questioning two people—a musician and a university economics lecturer—for spreading false information about the state of Latvian financial institutions. According to law, the deliberate spreading of such false information is illegal. It is a provision that had been introduced in a number of Eastern European countries to counter malicious disinformation that had resulted in several runs on banks in still fragile post-Communist economies in the 1990s. The musician made a throwaway comment about the banks during a concert. The economics lecturer’s view that people should not put money in banks and or keep it in the national currency, the lat, was reproduced in a Ventspils newspaper. Ironically, the actions of the security police made his views known nationally and even internationally: the American Wall Street Journal headlined this as “How to Combat a Banking Crisis: First, Round Up the Pessimists.” Despite the air of Keystone Kops, the issue of confidence in the financial sector remains.

The economic meltdown represents the final catastrophe in a year of great difficulty for Godmanis’ coalition government, criticised on all fronts for its handling of a number of economic and social issues, as Godmanis tried desperately to distance himself from the politics of the previous failed Prime Minister Aigars Kalvītis. As well as the growing dissatisfaction of public sector workers, the government narrowly defeated a popular referendum that would have allowed the dissolution of the Saeima through a referendum process. Relations with President Valdis Zatlers—originally seen as a badly chosen puppet of the coalition parties—have grown increasingly tense as he criticises the government both for lack of economic planning and for failure to move on a number of constitutional issues that have long debilitated Latvian politics. The failures of the year have also brought the leading People’s Party (Tautas partija) to its lowest point ever, a recent poll showing only 2.9 percent of the electorate would vote for it now. 

Finally, spare a moment’s thought for Godmanis. He is a significant figure in Latvian politics and was the prime minister at the most difficult time in 1990-1993 when he oversaw the end of Soviet rule in Latvia. He also oversaw the first huge economic downturn of the time that brought the old stagnant Soviet economy into a period of huge inflation, bankruptcy of enterprises, job losses and general turmoil. Somehow the government did get Latvia out of the Soviet Union and even set the basis for its future stable currency, and had the peculiar distinction of being the only government in Eastern Europe to survive a full term in that period. Godmanis could go down as presiding over both major economic disasters of recent history in Latvia—neither of them of his own making.