Dabar populiaru
Published: 17 september 2012 13:03

Rimvydas Valatka: Laser show at Vilnius Gates, Lehman Brothers crash, and never-ending crisis

Four years ago, on 5 September, as Lithuania was waiting for general elections, a US bank, founded by brothers Emanuel and Mayer Lehman in 1850, came crashing down, letting 26 thousand employees go. The 613-billion-dollar debt left by Lehman Brothers shook the foundations of the welfare world. Tremors are still felt today. And it does not seem like the crisis will ever end.

How many people passing by the dusty windows of Vilnius Gates (Vilniaus vartai) – the golden dream of the golden pair of [businessman] Laimutis Pinkevičius and [his wife] Asta Valentaitė – believe that the business centre will ever celebrate again? Like it did on the evening of 27 October 2007, when the sky above it was illuminated with lasers and fireworks announcing the opening of the hub of business centres, restaurants, nightclubs, and 17 boutiques selling  37 fashion labels.

On that peaceful evening, when the US was already listening to thunders of the approaching crisis, guests of Pinkevičius and Valentaitė were sipping expensive cognac and champagne, watching a laser and music show, listening to the National Symphonic Orchestra and maestro Vytautas Juozapaitis. Later, the public moved to the Pacha nightclub where their entertainment was in the able hands of a DJ from India.

Those good old nights at Pacha... One year later, Pinkevičius' [construction company] Ranga IV became insolvent. SEB and Snoras banks were distressed. Valentaitė left Pinkevičius. And all that remains of the beauty on the hill is Juozapaitis who is now seeking a post in the neighbouring Seimas.

What is the difference between this crisis and the Great Depression (1929-1933), if, four years later, we are threatened by its second wave?

Several days after the biggest bankruptcy in the history of the United States, as news channels across the globe were showing images of bankers taking boxes with their personal belongings out of the Lehman Brothers skyscraper, Lithuania's then Finace Minister Rimantas Šadžius was entertaining our emigrants in Dublin with a fairytale that life in Lithuania was rapidly improving and that food was getting cheaper.

Šadžius did not feel it was important to mention a thing he knew better than anyone else: that in August, when people traditionally loosen the grip on their purses, the state budget had collected 157 million litas less in taxes than anticipated. Prime Minister Gediminas Kirkilas was still making promises that, starting the following year, every Lithuanian citizen would be given a state guarantee to take out a housing loan.

Housing loans became unaffordable even to those who were lucky enough to keep their jobs. Yet somehow we continue to believe that we've deserved to live better. That we must earn more and work less.

Compared to the times of the Great Depression, today's welfare-state politicians have become more short-sighted. Less responsible. Slyer. They have learnt how to postpone crisis by, say, using taxpayer money to change newish cars with ones fresh off the assembly line in order to keep the automobile industry going for a little longer, on sheer inertia; or by taking out expensive loans to direct the biggest blow of the crisis at their political successors.

Is there a single political leader now who gives the most fleeting thought to how the state and the nation will have to live four years from now, or eight years? Political will and historical deeds are things of the past. State leaders were replaced by slaves to approval ratings who shiver at every trivial PR campaign and who need medical attention at every percentage-point drop in their popularity.

That is why the crisis still lingers. It stays with people who enjoy every guarantee provided by democracy and who are convinced that even if you work unimaginatively and sluggishly, even if you spit at democracy at your convenience, welfare guarantees will still protect you until the very end.

Politicians look at our mouths and only say what we want to hear. That everything will be fine. Even if the second wave of the crises does come. That we are so well prepared. Much better than in 2008, Prime Minister Andrius Kubilius claims.

Lithuania is even more vulnerable now than it was before. All we can do is pray that there is no second wave of crisis.

Holy simplicity! Either the Prime Minister is lying, or he fails to grasp the seriousness of the situation. Today, just like four years ago, the state budget is planned with a 3-percent deficit. Back then, the incoming Kubilius' administration saw an alarming decline in tax revenues and increased the budget deficit two-fold, by borrowing for draconian interest and using the money to tame the downturn or, to be more exact, push it back.

The social security reform has not been started. The retirement age has been raised merely nominally. Not a sign of governing reforms. By refusing the loan extended by the International Monetary Fund, not only did the Government taken on a bigger financial burden, but they also avoided implementing unavoidable reforms.

There was much talk and little work. This year, too, the state will be three percent in the red. What would happen if the economy starts to stagnate and the deficit jumps back up to 9 percent? What has fundamentally changed over the last four years?

One thing – the overall state debt. Compared to the times of Kirkilas' administration, it is twice as big now and is approaching 50 billion litas. If a new wave of crisis strikes, Lithuania will not have an option to save itself by borrowing. It will soon have to spend one sixth of its domestic revenues (excluding EU funds) on servicing its existing debt. Slashing benefits and pensions will not be an option either. There is nothing left to slash.

Moreover, Kubilius' Government worked during the time when Lithuania started receiving maximum EU support. Beginning late next year, this source will be drying up.

Can we therefore say that we are better prepared to face the crisis now? Lithuania is even more vulnerable than it was before. All we can do is pray that there is no second wave. Perhaps there isn't? Do we fear for no reason?

In August, China's exports slowed down to a very un-Chinese level. And if China is slowing down its engines, so will Germany. And after Germany it will be time for Poland, Estonia, Latvia. Oil prices will drop.

But that is good, isn't it? Not quite. In economy, there is no silver lining without a storm cloud. If oil prices drop, so will Lithuania's exports – already hit hard by slowdowns in Germany, Poland, and Estonia – to Russia. Russians won't have cash to spend on our foodstuffs and repaired old cars. And where else, besides the EU and Russia, can Lithuania export its goods?

Can anyone remember what the level of unemployment was in April 1999 when the Government of Gediminas Vagnorius, having been denying the crisis until the very end, came tumbling down? When one barrel of oil cost almost 100 dollars less than now – USD 9.5 (and petrol was 1.98 litas per litre)?

Unemployment was much worse than today. We might soon have an opportunity to remember those times. And all rosy promises by social democrats and the Labour Party will vanish into thin air.

Four years ago, Lithuania, along with the entire EU, entered a permanent and never-ending crisis. Neither Barroso's European Federation, nor handing over banking supervision to the European Central Bank can save us.

The Lisbon strategy – can anyone still recall it? – remained only on paper. Neither Barroso, nor other overpaid Brussels demagogues want to remember it, since the Lisbon strategy is a reminder of how incompatible are ambitions to live better on the one hand and work less, party more, and increase social security on the other – like life and death.

The Socialist Europe has lost competitive battle against the US and Asia. Acutely aware of that, Brussels losers try to remain above water by grabbing the oldest trick in every dictator's sleeve – greater centralization. Lithuania thought Europe would win. People seemed to live so happily there.

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