Wednesday, July 22, 2009

The first real National Crisis in recession Europe ? 

By Friday Latvia may go bust unless the IMF agrees to certain levels of support. This would have a serious knock-on effect right across the European Union.

For some sobering background to all this see the postings on 'A Fistful of Euros' blog from Edward Hughes. Such as this one on the European Community memorandum muddling the IMF approach.

The (European Community) document also stipulates that the government will have to report every month on all key aspects of spending and revenue, including providing a breakdown for each ministry as well as for local governments. These performance criteria, given the now near total dependence of the country on external support - de facto, as a sovereign state Latvia has effectively ceased (at least temporarily) to exist, some 19 years or so after its foundation - are not surprising in and of themselves, but it could have been hope that the country would have been better served in terms of the kind of advice which is being offered
With the IMF and the EU in a rift on this we can expect more confusion to come

One of the IMF demands is that Latvia end its 'Flat Tax' system in order to generate more revenue. As this posting shows, Latvians are very versatile evaders of existing tax rules (a hangover from Soviet days when it was a patriotic duty to bilk the government).

What will our MEPs do on this matter?

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