Fiscal consolidation, Latvian style

19. February, 2009

Just when you thought there is nothing that can surprise you anymore in this country, comes this.

LNT’s Degpunktā reports that Valmiera state prison had four special guards dogs shot as part of the economy regime. Apparently, the guards couldn’t bring themselves to do that so they called in an outsider and gave him a gun. I wonder if that’s the kind of measures that Mr Slakteris, the minister of finance, meant when he famously told the Bloomberg TV that we will be …taupīgi [economical].

But more seriously, this is another point to the case that wage devaluation just does not seem to be working very well in the public sector. In theory, what was supposed to happen is mostly nominal adjustment in wages of public sector employees, without affecting the supply of (useful) services of the public sector. It’s hard to call the above case a nominal adjustment. Having fewer guards dogs will make it easier for inmates to escape, which is a pretty real effect as well. Generally, there seems to be growing evidence that the economy regime is largely about cutting the supply of public services, and not just a nominal decrease in wages. This is not how it’s supposed to be.

Meanwhile, it seems that in Latvia, the expression being treated like a dog assumes a whole new meaning… raksts

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