Jānis Saliņš, F/64
Latvia has a high proportion of public sector employees
The Latvian austerity measures are now about two years underway and the consolidation so far has been of epic proportions but still more is needed. Why not start by reminding ourselves exactly how reckless spending was in the ?fat years? and thus why so much consolidation is needed now, see graph below.
Latvian budget seasonality!
Expenditure of the general government sector, quarterly data, 2004 ? 2007,
mill. LVL (nominal)
Source: Statistical Bureau of Latvia
Back then, with dizzying growth rates, tax revenue flooded into the Ministry of Finance ? just to be spent as quickly as it entered. Look e.g. at the fourth quarter of 2006. Spending there rose by no less than 71% compared to the third quarter ? record fiscal incontinence if you ask me and we know that even at these unsustainably high growth rates with their record tax revenue avalanches, the government still recorded budget deficits.
