The American Repossessor

RIGA, Latvia – For 20 years, Svetlana Stroganova made a living teaching grade-school physical education in Latvia as the country left its Soviet past behind and became a dynamic European market economy.

Now she’s leaving, moving to her native Russia to flee a crisis that has forced the government to slash her salary and that of many other public employees by 20 per cent.

“I don’t see any future here for my children. I don’t believe in this country any more,” says Stroganova, a 44-year-old who shares a three-room apartment in Riga with her 23-year-old son and nine-year-old daughter.

Her reduced monthly salary of 370 lats (US$730) is not enough to make ends meet – the winter heating bill alone was nearly 100 lats ($200) a month. And with further cuts expected she’s not taking any chances.

“I don’t believe the economy will ever pick up again in this country,” she says. “This country doesn’t produce anything that the rest of the world wants.”

Her comments reflect the deepening sense of despair seeping through Latvia as the economy nosedives, with public employees like teachers and police officers feeling much of the pain as the government chops its budget to meet the terms of a euro7.5-billion ($10.5-billion) international bailout package.

Riga police captain Agris Suna, a 44-year-old father of three with 16 years on the force, says he’s making 450 lats ($900) a month after a 30-per cent pay cut in January.

“The monthly utility bill for my apartment eats up half my salary, and the rest goes for food. That’s it – no more new clothes, no more anything,” he says.

Economists were debating whether Latvia was in a recession or a more serious depression, when all doubt was erased by statistics for the first three months of 2009. The economy shrank by a mind-boggling 18 per cent – the steepest fall in the 27-member European Union and one of the most dramatic drops anywhere in the global downturn. And there’s no end in sight.

“We do not see this as the bottom,” Danske Bank analyst Lars Christensen says. “The situation is still extremely challenging. It now looks like Latvia may see a 20 per cent drop in GDP this year.”

The signs of implosion are popping up in the graceful Art Nouveau blocks of downtown Riga, the capital. Dozens of shops have been abandoned. Restaurants and beauty salons are empty. Streets are quieter as cars repossessed from bankrupt Latvians are sold to foreign buyers at discount prices.