By Dave Anderson:
The young people leaving, houses not even being boarded up because the nails alre worth more than the house, and the people who remain behind are stuck without the easy capacity to move. That is the pattern of old single industry towns dying. Some die quickly, some die slowly, but the death rattles are the same as Detroit knows too well. But this time I am not talking about a city; I am talking about a nation, Latvia.
A Fistful of Euros has the grisly details:
A good chunk of problem is that Latvia's elite are still attached to a barbarous relic, the hard Euro peg. Latvia surrendered policy autonomy by "euro-izing" much like Ecuador and Panama have dollarized their currencies to gain the debt market advantage of having the Federal Reserve or the European Central Bank being their central bankers who are much more isolated from local political pressures that would want inflation. Latvia really needs to let their currency float and become much weaker in comparison to the dollar, ruble and euro so that there is a chance that it could export its way out of a nasty depression. Instead, it has anchored itself and its future to the folly of a single currency without sufficient countercyclical boosters, labor market flexibility and migration patterns.;Latvia, which has had the deepest recession of all 27 European Union member states, contracted by nearly 18 per cent in the fourth quarter of 2009...
Industrial output, which rose slightly over the quarter, fell back again in Deecember (by a seasonally adjusted 4.2%) following a sharp rise in November. Output is still down more than 17% from the February 2008 peak....
Unemployment hit 22.8% in December according to Eurostat data, the highest in the European Union.
This will produce a hollowed state on the Baltic as anyone who can leave has either already left or should be looking to go elsewhere.
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