BALTIC BLOG: Latvia's big hair day

By bne IntelliNews June 6, 2012

Mike Collier in Riga -

One year ago, following Christine Lagarde's somewhat hasty appointment as big boss of the International Monetary Fund (IMF) in the wake of Dominique Strauss-Kahn's special guest appearance in Hotel Babylon, some embarrassing tales of Mme Lagarde's own past were being revealed over a beer in Riga's central Dome Square.

"It must have been at least 25 years ago," a highly successful British-born, Asia-based investment banker told bne. "She was impossible to forget, because she was the only person you ever saw sitting around the board table with an afro and bright clothes. Even then, you could tell she was brilliant - though if you'd told me the girl with the afro would be head of the IMF one day, I don't think I would have believed you."

Twelve months later on June 5 and with the beer gardens doing a roaring trade once again, it was Lagarde herself who was in town, shorn of her afro, but with the world hanging on her every word as the Eurozone crisis teeters on the brink of cataclysm.

The IMF conference at which she was topping the bill was supposed to trumpet the Fund's success in helping turn the Latvian economy from basket case in 2009 to case study in 2012. Estonia, the previous class swot which slightly blotted its copybook by joining the embattled Eurozone just as the single currency started to collapse, was also on hand to remind everyone how it got there first in the lugubrious form of Finance Minister Jurgen Ligi, who memorably declared: "It is better for the finance minister to die than to say 'We can't deliver'."

But it was Lagarde, grey hair cut into an elegant style, who held centre stage, seeming at times like the aristocratic lady of the manor who comes into school to say well done to the graduating pupils while offering a couple of mild warnings to stay on the right path in the big, wide world and not fall into bad habits by mixing with Greece or Spain.

On the reasons for Latvia's strong emergence from its €7.5bn bailout, Lagarde said: "If you want to single out one factor specific to Latvia, it was the impressive collective determination. At a very basic level everyone knew what had to be done... there was almost that feeling of mistakes have been made, mistakes have to be fixed. Latvia decided to bite the bullet, and the achievements were incredible," Lagarde said.

The IMF chief also urged Latvia to stick to its goal of adopting the euro in 2014, while signalling none-too-subtly that major changes were needed in the way the single currency operates. "Joining the euro - the monetary currency which by then I hope will have expanded beyond a strict monetary currency to become much more of a fiscal and financial union as well as being a monetary union - clearly would remove exchange rate uncertainty," Lagarde said.

Showing what a consummate performer she has become, Lagarde even ended with a joke, saying: "I have real trust in Europe and the Europeans... if I could do one thing, I would lock them in a room, take the key and let them come out only when there is a comprehensive plan. But I would definitely have to take the key."

Compared to the attempts at humour by Latvian central bank governor Ilmars Rimsevics or the European Central Bank's Jorg Asmussen - two men with all the human warmth, wit (and in Asmussen's case, the looks) of Yul Brynner's homicidal cyborg in "Westworld" - this was comedy gold.

Most of the day was given over to unashamed cheerleading for Latvia's economic renaissance, with Latvian Finance Minister Andris Vilks seeming to get almost literally high on success. "It's like sportsmen going to high altitude training camp," he said. "You get stronger and then when you come back to the lowlands you feel really good... I hope we will be able to do another miracle."

Dissenting voices were few, limited to brassy Australian trade unionist Sharan Burrow who called for "jobs, jobs and jobs" and Armands Strazds, an economist with political ambitions. "I feel like everyone in the auditorium except me has been hypnotised," Strazds told bne. "Sweden tricked the politicians and everyone in Latvia into a rescue package that was actually to save the Swedish banks. For them of course, it was the right thing. For Latvia it was and is terrible suffering."

What a party pooper.

Valdis Dombrovskis, Christine Lagarde, Oli Rehn

Foto credit: Toms Norde, Latvian state chancellery

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