“Devaluation would be the best way for the moment”, says Egils Baldzens, vice chairman of the Latvian trade union federation LBAS. This is a controversial statement in Latvia, but according to reports in Swedish business daily Dagens Industri today, it might be coming true.
The central bank in Latvia is running out of resources to defend the currency and might have started to discuss a devaluation, contrary to all official statements so far.
I met Egils Baldzens last week in Riga. He made many interesting remarks, on the factors behind the crisis, on the inequal Latvian society, on the joint proposals from trade unions, employers federation and municipalities for a way out of the crisis.
If the IMF and Swedish government had listen to him and other trade unionists earlier, the economic situation could have been managed better. Instead, drastic wage cuts and a contraproductive increase of VAT and accise taxes have worsened the situation.
The EU, including the Swedish government, bears a great responsibility for finding ways out of the dramatic crisis in the Baltic countries, as I have argued in Aftonbladet. This will be a main issue for the forthcoming Swedish Presidency of the EU, whether Finance Minister Anders Borg likes it or not.
Quotes from my talk with Egils Baldzens are available here: Interview with Egils Baldzens