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Economic Crisis Fuels Unrest in E. Europe
Shaky Governments Face Growing Anger

By Philip P. Pan
Washington Post Foreign Service
Monday, January 26, 2009

RIGA, Latvia -- On a frigid evening this month, more than 10,000 people gathered outside a 13th-century cathedral in this Baltic capital to protest the government's handling of Latvia's economic crisis and demand early elections. The demonstration was one of the largest here since the mass rallies against Soviet rule in the late 1980s, and a sign of both the public's frustration and its faith in the political system.

But at the end of the night, as the crowd dispersed, the protest turned into a riot. Hundreds of angry young people, many drunk and recently unemployed, rampaged through the historic Old Town, smashing shop windows, throwing rocks and eggs at police, even prying cobblestones from the streets to lob at the Parliament building.

Similar outbursts of civil unrest have occurred in recent weeks across the periphery of Europe, where the global financial crisis has buffeted smaller countries with fewer resources to defend their economies. Especially in Eastern Europe, the turmoil reflects surging political discontent and threatens to topple shaky governments that have been the focus of popular resentment over corruption for years.

Europeans have compared the unrest to events of the 1960s and even the 1930s, when the Great Depression fueled political upheaval across the continent and gave rise to isolationism and fascism. But no ideology has tapped into public anger and challenged the basic dominance of free-market economics and democratic politics in these countries. Instead, protesters appear united primarily by dashed economic hopes and hostility against the ruling authorities.

"The politicians never think about the country, about the ordinary people," said Nikolai Tikhomirov, 23, an electronics salesman who participated in the Jan. 13 protest in Riga. "They only think of themselves."

Days after the riot, a demonstration by 7,000 protesters in neighboring Lithuania turned violent, leading police to respond with rubber bullets. Fifteen people were injured. Smaller protests and clashes have erupted in Bulgaria, the Czech Republic and Hungary, following weeks of street violence in Greece last month. On Thursday, police in Iceland used tear gas for the first time in half a century to disperse a crowd of 2,000 protesting outside Parliament in Reykjavik. The next day, Prime Minister Geir Haarde agreed to call early elections and said he would step down.

Dominique Strauss-Kahn, head of the International Monetary Fund, said the financial crisis could cause further turmoil "almost everywhere," listing Latvia, Hungary, Belarus and Ukraine as among the most vulnerable nations. "It may worsen in the coming months," he told the BBC. "The situation is really, really serious."

There is particular concern about the relatively young and sometimes dysfunctional democracies that emerged after the fall of communism in Eastern Europe, where societies that endured severe hardship in the 1990s in the hope that capitalism and integration with the West would bring prosperity now face further pain.

"The political systems in all these countries are fragile," said Jonathan Eyal, director of international security studies at the Royal United Services Institute, a research group in London. "There's a long history of unfulfilled promises and frustration with the political elites going back to the Communist era."

Eyal warned of a revival of ethnic conflict in the region, where most countries have large minority populations, adding that tensions could rise after workers who have lost jobs in Western Europe return home. But he noted that extreme nationalist movements have won only limited support in Eastern Europe in recent years.

"People here instinctively know the idea of a strongman who imposes order doesn't work," he said, arguing that the region's history with Communist rule, its integration with the European Union and its anxiety about Russia's intentions make a turn toward authoritarianism unlikely. "They have seen the past, and a return to previous populist schemes isn't very persuasive. At the end of the day, they know there's no alternative to the market economy."

That assessment rings true in Latvia, where the government's approval ratings have fallen as low as 10 percent -- the worst in the European Union, and lower than at any other time in the nation's post-Soviet history -- but where people scoff when asked if they want to abandon markets and political freedoms.

"If some politician said, 'Let's leave the E.U., give up democracy and free markets,' you can be sure that nobody would vote for him," said Aigars Freimanis, director of Latvia's largest polling firm. The memory of Soviet occupation makes it difficult even for mildly left-wing parties to win elections, he said.

But Freimanis said public anger could bring significant political change, noting that the crisis has renewed debate on constitutional reforms, including measures to give citizens the right to dismiss Parliament and to vote for individual lawmakers instead of only political parties.

"We want more democracy, not less," said Renata Kalivod, 28, a social worker who attended the protest in Riga. She said that her father, who recently lost his job, had given up on elections but that she still believed it was possible for the public to have an impact. "If I gave up, I would leave the country like other young people. But I'm still here," she said.

After enjoying double-digit growth rates that were among the highest in the E.U., Latvia is now struggling to defend its currency and survive a sharp slowdown. The economy is forecast to shrink by 5 percent this year, after a 2 percent drop last year. Unemployment has doubled in the last six months to 8 percent, with the rate three times as high among young people.

Forced to accept a $10.5 billion bailout from the IMF, the European Union and other sources -- including neighboring Estonia, a fact some considered humiliating -- the government has embarked on an austerity program involving 25 percent budget cuts, 15 percent wage reductions for civil servants and large-scale layoffs.

Aigars Stokenbergs, an opposition leader in Parliament who quit the ruling coalition and helped organize this month's protest, said the public was as upset about corruption as economic mismanagement. The same conservative parties have dominated the government for years, he said, and many believe they serve a handful of billionaires who struck it rich in the privatization schemes of the 1990s.

"People don't want this government anymore. They don't trust it," he said, criticizing Parliament for firing the nation's anti-corruption chief in June and adopting the IMF reforms in a single day without consulting unions, businesses or other groups.

But Andris Berzins, a leader in the ruling coalition and former prime minister, said the public's anger is misplaced because the country's problems are rooted in decisions by previous administrations to expand spending instead of building up reserves. "The government needs to take some very serious economic reforms, but it hasn't been able to build public support for them," he said.

Public anger intensified in December when the finance minister, Atis Slakteris, badly fumbled an interview on Bloomberg Television. Asked what had caused Latvia's economic crisis, he replied, "Nothing special." The words were soon emblazoned on T-shirts and shop windows as parodies proliferated on the Internet.

The riots, which left about 25 people injured and resulted in 106 arrests, have unnerved people in part because Latvia has practically no history of such violence. Some are worried the crisis will exacerbate tensions between ethnic Latvians and the nation's Russian-speaking minorities, who make up more than a third of the population.

President Valdis Zatlers has responded by distancing himself from the ruling coalition that elected him and essentially siding with the opposition, threatening to dismiss Parliament if it fails by March 31 to pass a set of reforms and take other specific actions to build public trust.

But under Latvia's aging constitution, the president must call an unprecedented referendum to dismiss Parliament. Early elections would be held if it passed, followed by talks to form a new government. The entire process could take more than eight months, and some say such a prolonged period of political uncertainty would hinder Latvia's efforts to repair its economy, resulting in further unrest.

Governments across Eastern Europe face similar uncertainty, and analysts said the timing of electoral cycles could determine which ones fall. Newly elected governments in Lithuania and Romania might survive, for example, while the Bulgarian government faces elections this summer and is in trouble.

Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington, said it makes sense in Latvia to hold new elections because the current Parliament is "utterly discredited" and can do little for the economy in any case. "You can't have a government that has no support," he said. "It's useless."

Analysts said the E.U. serves as a bulwark against radical politics in the region, but they warned of a backlash if the developed nations that dominate policymaking ignored the problems of the smaller ones. In Latvia, politicians and business leaders complain about E.U. agricultural subsidies that benefit farmers in Western Europe and trade barriers in the service sector. But they have praised the E.U.'s swift response to the country's economic crisis so far.

Pavel Nazarov, 21, a physics student who participated in the rally, said he welcomed E.U. intervention for another reason. "They can keep an eye on our corrupt politicians," he said, "even when we can't."

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