Washington Post:
Baltic countries hold a lesson for Greece in crisis

As Greece’s anguish spills into the streets, three small Baltic countries may offer an example, if not a model, of how to survive an economic crisis through austerity measures.

After suffering the deepest recession in Europe during the global financial crisis, Latvia, Lithuania and Estonia swallowed the bitter medicine that Greece is now being asked to take.

Painful cure
They slashed pensions, welfare benefits and public sector salaries while raising taxes. Latvia, which came dangerously close to bankruptcy, had to fire thousands of public servants and close schools and hospitals.

It was painful, but the cure worked. Battered and bruised, the three former Soviet republics are now on a path to recovery. Latvia’s budget-cutting government even won re-election last year.

“Latvia has a lot of lessons for Greece, but they are all coming too late,” said Morten Hansen, head of the economics department at the Stockholm School of Economics in Riga.

The main lesson: Push through austerity measures quickly before public support ebbs out.

Morten Hansen, head of the economics department at the Stockholm School of Economics in Riga.

“You can have that support for some time, but not three-four years,” he said. “Now people are starting to get more unhappy (in Latvia), but now the worst is over.”

Protests in Greece, where anti-government demonstrations are more common than in Northern European countries, have taken on new momentum. There is a constant sit-in in the central square in Athens and violent clashes with police have become a regular occurrence.

In the Baltic countries, which for decades suffered under a brutal Soviet occupation, the fiery Greek protests have been met with some bemusement. Besides a couple of clashes in Riga and the Lithuanian capital, Vilnius, in 2009, the Baltic countries didn’t see any street violence.

Cultural differences
“For me it comes down to some cultural differences — we just understand the world differently. We accept the cuts, are not happy with them, especially those who suffer from it directly, but we understand why we have to do that,” said Marge Tubalkain-Trell from Estonia, who lost her job and had trouble getting the medical care she needed because of crisis-related social cuts.

Deimante Doksaite from Lithuania, which narrowly avoided having to take its own bailout during the crisis, agreed.

Greeks are spoiled
“Greeks are spoiled. Being quiet helped us to deal with the crisis,” said Doksaite, who lost her job as a media relations officer when the crisis struck.

Greece has already implemented austerity measures to meet the conditions of a €110 billion ($158 billion) bailout from Europe and the International Monetary Fund. But it has struggled to meet many of its targets, and is now in negotiations for a second bailout. The government faces a crucial vote next week for a new round of austerity measures.

The parallels with Latvia are striking.
In 2009 Latvia was nearing default, with over 300 percent more maturing foreign debt than reserves. Many speculated it would have to abandon its currency peg to the euro.

Latvia was the hardest hit country in the world
According to the IMF, Latvia was the hardest hit country in the world by the economic crisis, with an overall decline in gross domestic product of around 25 percent. Unemployment reached nearly 23 percent while foreign investment dropped to almost zero.