Crisis in Latvia. Crisis Diary by Katya. September 2009

2009-09-25

Answers to reader’s questions.
Maria from Sweden asks:
“You write that people start to steal things like food in the food store, I wonder, has the food prices raised much because of the crisis?”

On the contrary, prices have fallen a little bit. Fore some groceries like milk, cheese and meat prices are up to 30% less than last year (although all the foreigners are still shocked about the expensive groceries in Latvian shops). Clothes you can purchase 20%-40% cheaper than last year, different sale actions are performed regularly in every shop. But unfortunately it doesn’t helps much and income of shops this year is decreased meaningfully, many of them have closed. The reason of this phenomenon is the dramatic purchasing power capacity fall. People have to think first how to survive and save money in every possible way.

“I guess many people have lost their jobs, what happens to them?”

Yes, you’re right; many people have lost their job. Unemployment level in Latvia reached 11,8% in July and 12,1% in August. Part of the unemployed people was employed officially and their employers paid income tax and social tax. This is the lucky group, which have got an unemployment relief. Unfortunately, many people from building industry, service sphere had so called “envelope’s rewards” - this is a wide spread phenomenon in Latvia due to the enormous taxes employers have to pay. These taxes rose in December 2008 and The Government is planning to raise it again in 2009. Many people choose envelope’s rewards instead of the significantly less salary due to the tax paying.  So, this group have no unemployment reward, and their only opportunity is to manage the status of low-income person and to have some payments reduction like public facilities etc. The employment service of the State has very few job opportunities to offer, inspectors of this state agency without any ceremony encourages people to go abroad. 
The problem of alcoholism and suicides has dramatically risen. So, this is a solution, too.

“I have red that much people have to leave the country, is it because they have no other choice?”

There is a really bad situation in Latvia. Even the premier minister of Latvia encourages people to go abroad. There is a saying, that debts Latvia has taken from International Monetary Fund to promote some surviving of the country, the people of Latvia will be obligated pay back in 7 generations. One may oppose and list the good and positive examples - one old lady has started a new business - the producing of self made cosmetic creams using French recipes, one young girl in countryside has opened a shop of hokey-pokeys and somebody is buying these things, and one famous man in Riga has opened a brand new restaurant and everybody wants to have a cake in it. If you have been smart enough to recognise early the signs of financial crisis ant to get in time with money gathering, preparing to the bad times, you will survive in Latvia. Unfortunately, there is so little number of these smart beings …