Mike Collier in Riga -
For a man about to be made responsible for Europe's most-troubled economy, Einars Repse is managing to stay remarkably calm. bne spoke to Repse on March 12 just moments before he was voted in as Latvia's new finance minister, a position that became a virtual laughing stock under his predecessor, Atis Slakteris.
Slakteris' tenure reached its nadir in an ill-advised interview with Bloomberg TV during which his broken English and general naivetÃ© caused toe-curling embarrassment. Slakteris' answer when asked what went wrong with the Latvian economy - "Nothing special" - has since become the comedy catchphrase of the year.
While Repse may have a few idiosyncracies of his own (including penchants for wearing Stetsons and flying helicopters), he seems refreshingly free of idiocies and is eager to get down to business. "The situation is serious but workable," Rpse told bne. "Our own shortcomings and the global crisis have left a very distinguishable impact, but the situation is solvable. It is not wartime. We do not have a destroyed country and economy, so hopefully we will be back on the track to recovery very soon."
That's true enough, but it's instructive that the wartime analogy is one to which Repse often returns in conversation. Repse is no novice when it comes to crisis management. Before founding the New Era political party that has just forced its way back into government under new Prime Minister Valdis Dombrovskis, Repse served an even more important function as governor of the Bank of Latvia when the country regained its independence from the Soviet Union, holding onto the post from 1991 to 2001.
He oversaw the introduction of the national currency, the lat, by way of the temporary "Latvian rouble," which anyone who was around at the time will happily fish out from behind the sofa or shoebox in the attic. It's an achievement Latvians continue to acknowledge and of which Repse remains proud. "All that experience can be used. I was at the central bank from the very beginning when independence was restored and I oversaw the establishment of the national currency here. The currency reform was actually my own design and together with the people at the bank of Latvia, we accomplished it," he said.
His period as Latvian prime minister from 2002-4 on an anti-corruption ticket began promisingly but ended disappointingly. Yet compared to the chaos of the last couple of years in the Baltic state, it is beginning to look like a mini-golden age.
What's certain is that Repse has his work cut out in his new job. By any measure, the Latvian economy is in dire straits. One of Slakteris' final acts was to revise 2009's GDP predictions downwards from painful minus 5% to an excruciating minus 12%. Most independent analysts agree that even this figure is too optimistic and are talking about falls of 15-20%.
In that context, wage cuts of 20% across the board for the public sector (with the exception of doctors and nurses whose pay will shrink by "just" 10%) that would cause the barricades to be erected in France or Italy are being taken with remarkable stoicism by most Latvians.
Politicians need to lead by example, according to Repse, as the crisis causes even old enmities to be put aside. "I see that politicians - even those who have been our competitors for a long time - understand the necessity for very tough, fast and well-thought-through decisions," he says, making a point of praising the role played by new PM Dombrovskis. "This is a good job that Mr Dombrovskis has performed and indicates that people associate their hopes for a fresh start with the new government despite the fact that there have been no new elections and parliament is more or less the same."
Asked what his first acts will be as finance minister, Repse draws a distinction between things that can be done quickly and more important long-term objectives. "The quickest thing is straightening out the current situation with the budget. The most important thing is to enhance and promote the development of the economy. We need to put our government onto austerity measures, but our country on the growth path," he said.
As to where that growth will come from, Repse identifies three areas that investors might like to consider. As well as Latvia's traditional reliance on timber and timber products, he believes medical services and ecological food offer good growth potential. "I cannot forecast what will be our world famous product in five or 10 years, but there definitely will be something or other, just like the Minox camera was before the war," he said.
On the crucial question of whether Latvia can renegotiate the terms of a €7.5bn international bailout package brokered by the International Monetary Fund in light of its worsening outlook, Repse is optimistic. "Those people are pragmatic and intelligent, so there is always a possibility to renegotiate provided you have proper grounds for doing so. Obviously we have to do our own homework here and then go to discuss the terms of further assistance," he said.
But the overwhelming message is that Latvia can repeat its Lazarus-like ability to rise from adversity. "We can do it again. Latvia still has many bright, hard-working people. Perhaps we have been lacking proper political guidance and there still remain some traces of Communist times in the psychology. We have to do it again," Repse insisted.
Send comments to The Editor
bne IntelliNews - Latvia's Citadele Bank has postponed its initial public offering (IPO), citing “ongoing unfavourable market conditions”, the bank announced on November 11. The postponement ... more
Kit Gillet in Bucharest - The euro, conceived as part of a grand and unifying vision for Europe, has, over the last few years, become tainted and often even blamed for the calamities that have ... more
Graham Stack in Berlin - A Latvian financier linked to the mass production of Scottish shell companies has denied to bne IntelliNews any involvement in the $1bn Moldovan bank fraud that has caused ... more