Global Economic Meltdown Fells Latvia's Government - Will Other EU Leaders Also Fall Victim to Violent Social Uprisings     Print

The Latvian Prime Minister, Ivars Godmanis, has resigned under popular pressure and violent protests against his center-right coalition government. The collapse of his government fits a pattern that started in Iceland, where the government fell last month as a result of social unrest due to the impact of the economic recession.

Like Iceland, some EU countries – notably the Baltic States and countries in central and Eastern Europe – have been particularly hard hit by the global economic crisis. Their banking sectors have been caught in a squeeze because their currencies, which are outside the euro, have collapsed, making it impossible to pay the interest on funds they borrowed from lenders in euros.

Across Eastern Europe and even in some larger countries such as France, there are alarming signs of social unrest in recent weeks. Greece has seen a flare-up of violence that paralyzed Athens. French President Sarkozy moved this week to quiet unrest in Guadeloupe. The International Monetary Fund has provided emergency assistance to Hungary and Ukraine, which has been described as being on the brink of economic collapse.

The severity of the meltdown in these countries has been overshadowed in the mainstream Western media because of more immediate problems in the United States and the largest EU member states.

But the problems of these states in the “emerging Europe” may be even more intractable because they are in “financial purgatory,” and their hopes of recovery have to wait for the long-term stabilization. Meanwhile they are hoping for a short-term bailout while trying to disarm social conflicts, according to the online intelligence company, Stratfor.

The gist of their analysis is this: “The economic crisis came to a head on Jan. 13 in the Baltic state when riots erupted in front of the parliamentary buildings. Hundreds of protestors clashed with the police that resulted in 30 injured protesters and 120 detained by police. The protests eventually spread to neighboring Lithuania, where on Jan. 16 police used rubber bullets and tear gas to disperse protesters that threatened to storm the parliament building.

“The fall of the government in Riga may only cause further social unrest across the region, particularly in the neighboring Baltic countries, but also across the troubled emerging market region of Central Europe.

“A brutal and unavoidable economic correction is not quite over for Latvia and other Central European and Balkan countries, often referred to as “emerging Europe.” While Riga attempts internal crisis management by changing those in power, ultimately the country is held hostage by circumstances — particularly credit availability, but also overall European economic recovery — beyond its control. Latvia is now facing the same situation as much of its other emerging market neighbors, waiting for the broader European markets to recover in the long term and hoping for a regional bailout in the short term.”