Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases

[Windischer]

free trade is good. but inequality in subsidies is a killer.

this is analogous of a state pushing certain businesses out of market in favour of others. basically a gangster practice.

[Inti]

That'd be a unwisel for Latvia to do away with agricultural sector pushing towards ‘technology’ based economy. The country does not have human or financial resources to become a technology driven economy. Research and Development is an expensive and risky investment. No sane investor will invest in R&D in Latvia. Latvia can be a successful production based economy as it has been in the last 50 years. It can also be a service based economy as many developed and developing countries around the world. Besides, there is nothing with agricultural sector taking up to 20% of the GDP. NZ & Australia have sizeable agricultural sectors. Australian economy will give a run to most European economies. I agree with Citizen. Agricultural sector is a very important to her country, and societies of many countries in old Europe and Japan, for example. It’s for this reason the developed countries are protecting their agricultural sectors willing to bear extra expenses.

[Pure ja]

No they don't actually. Their salary was reduced by up to 50% and sometimes even more during the crisis so they infact get less than 10 years ago.

If the set of clients (children in schools) halves, then it is impossible to go on as usual. The local people have to force the state to negotiate a new fair compromise. Leaving the country does not solve the root problem, which is bad government.

And some models are incorect.

And even incorrect models can be useful.

It is our gov. who is praising the euro holy cow while in fact its a hostile organization to us which has done everything to hamper our development.

Eurozone will lower the interest rates in Latvia and will deal away with currency exchange costs (which were about 0,5% of GDP in Estonia before joining the Eurozone). On the other side, it might bring about excess inflation and excess loan guarantees to other EU states in debt. BUT, one can only give loan guarantees IF one is evaluated as fit to do so (with a good rating). If Latvia is not rated high, then Latvia's loan guarantees are not asked for. AND, giving loan guarantees to loans of other EU states is just a facade - there is no will to actually pay the guarantees. So the additional loan guarantee issue is moot. Latvian money is already tied to the EURO, so currency devaluation or floating issues are also moot. That leaves only fears of likely excess inflation, which is an issue of a common EU market and EU convergence process.

[Pure ja]

That'd be a unwisel for Latvia to do away with agricultural sector pushing towards ‘technology’ based economy.

Agricultural sector is just as much tech-intensive as anything else. In fact, it might even become TOO tech-intensive, if GMO and plant patents are to be allowed (the Monsanto nightmare). In fact, the average Estonian farm is much larger than the average of the rest of East European EU countries. But it is also important to keep eco-friendly agriculture which in some respects is low-tech, but in other respects even higher tech.

And then there are startups like Click-n-Grow.

The country does not have human or financial resources to become a technology driven economy. Research and Development is an expensive and risky investment. No sane investor will invest in R&D in Latvia.

That is debatable. It is difficult, yes. But not hopeless.

Agricultural sector is a very important to her country, and societies of many countries in old Europe and Japan, for example. It’s for this reason the developed countries are protecting their agricultural sectors willing to bear extra expenses.

Also Denmark and the Netherlands show that agriculture can have a large role in the economy.
Incidentally, Denmark and the Netherlands were important partners of medieval Livonia and Estonia. Agricultural items was the main local export article in Estonia and Livonia during the medieval times.

[Citizen]

If the set of clients (children in schools) halves, then it is impossible to go on as usual. The local people have to force the state to negotiate a new fair compromise. Leaving the country does not solve the root problem, which is bad government.

The children per teacher have not changed, many schools where also closed and teachers fired. Leaving country solves peoples private problem of surviving and living with dignity, if they feel they cant affect gov. like with the undemocratic euro introduction.

And even incorrect models can be useful.

Whatever.

Eurozone will lower the interest rates in Latvia and will deal away with currency exchange costs (which were about 0,5% of GDP in Estonia before joining the Eurozone). On the other side, it might bring about excess inflation and excess loan guarantees to other EU states in debt. BUT, one can only give loan guarantees IF one is evaluated as fit to do so (with a good rating). If Latvia is not rated high, then Latvia's loan guarantees are not asked for.

Exchange costs work both ways, businesses that orientate to local market are more competative compared to outsiders who have to exchange currency which works almost like import tax on them. Not to mention inflation risks and costs of ESM after euro.

AND, giving loan guarantees to loans of other EU states is just a facade - there is no will to actually pay the guarantees.

Whats a loan guarantee, I dont know such a financial term.

So the additional loan guarantee issue is moot. Latvian money is already tied to the EURO, so currency devaluation or floating issues are also moot. That leaves only fears of likely excess inflation, which is an issue of a common EU market and EU convergence process.

I disagree, floating currency would be great in Latvia like it is in Czech rep.

[Inti]

Agricultural sector is just as much tech-intensive as anything else. In fact, it might even become TOO tech-intensive, if GMO and plant patents are to be allowed (the Monsanto nightmare). In fact, the average Estonian farm is much larger than the average of the rest of East European EU countries. But it is also important to keep eco-friendly agriculture which in some respects is low-tech, but in other respects even higher tech.

And then there are startups like Click-n-Grow.

Agriculture is more of a production using high-tech already available plus the local know-how. The country may find its place on a niche market producing naturally grown products which customers from the upper middle class are eager to buy paying extra. It's a wishful thinking in the modern world but it may be possible.

That is debatable. It is difficult, yes. But not hopeless.

I can't see the country having a comparative advantage in R&D or high-tech, so it may not be economically feasible to invest in these sectors in present time.

If Latvia has plenty of arable land and a rural population, then there is no reason why the growth of agricultural sector shouldn't be promoted. EU is not the only market on which small Latvia can sell its produce.

[Fortis in Arduis]

I'm not suggesting to completely abolish agriculture, that would be stupid.

The EU subsidisation system blows because it prevents agriculture from responding to the market, creates unnecessary and inefficient inter-dependencies, ruins home markets by encouraging inefficiency. Big swindle.

Also, having a food surplus is weapon of war, one of which the white man is particularly proficient and competitive in producing. Why stifle that marvelous ability?