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Latvian report Latvian report
by Euro Reporter
2015-03-06 10:52:05
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New Latvia Law Takes on Legacy of Bad Mortgages

Six years after suffering Europe’s biggest recession, Latvia is trying a controversial recipe used in some U.S. states to free people of household debt. Parliament on Thursday passed a set of laws allowing people to choose a “non-recourse” mortgage that will allow household borrowers the option of returning the keys to the banks if they can’t pay their loans, while preventing the lender from pursuing the borrower’s other assets. The legislation was partly modelled on non-recourse mortgage laws in 11 U.S. states. Non-recourse mortgages have been accused of aggravating the U.S. housing crisis in the mid- to late 2000s, triggering steeper losses for banks and fuelling uncertainty about the extent of future defaults. The final Latvian proposal was watered down to allow a choice of options after the Scandinavian banks dominating the region said a law making non-recourse mortgages mandatory, passed last fall but not yet in force, would price middle-class families out of the market by doubling down payments.

“The returned-keys principle must be a choice so that our people can more easily buy a home,” Latvia’s Finance Minister Jânis Reirs said. Latvians are still hurting from the country’s property crash in the wake of the 2008-2009 financial crisis, when home prices fell by as much as two-thirds in just under three years. Many borrowers, who piled on huge amounts of debt during the boom years in the early- to mid-2000s, have lost their homes but are still stuck with hefty loans and no bankruptcy process that will allow them to walk away. From 2005 to 2008, the volume of consumer and mortgage credit more than doubled while boosting real-estate prices by as much as 240%, according to an EU-sponsored study by Latvian economist Janis Kajaks.  The compromise laws, passed by a majority vote in the 100 member parliament or Saeima, will avert what banks in Latvia called a potentially destructive experiment with no-recourse mortgages, which aren't commonly used in most of Europe.

The last-minute amendment of an earlier law that would otherwise take effect on March 1 is also packaged with changes in bankruptcy legislation that will provide debt relief to thousands of Latvians. The bankruptcy process changes will allow old debts to be paid off if the debtor agrees to pay one-third of his or her income against the debt for a period starting at one year. These measures will cost the banks €30 million ($34.2 million) to €50 million in write-offs, according to Kristaps Zakulis, chairman of Latvia’s bank regulator, the Financial and Capital Market Commission. The law mandating non-recourse mortgages was passed by the Saeima last fall as a measure aimed at preventing more hardship cases where borrowers had their homes sold at auction but were still pursued by the banks for any outstanding funds. The amendment of the law, which would otherwise have come into force in less than two weeks, was called a victory for “the banking lobby” by opposition politicians. Ivars Zarins, a parliamentarian from the opposition social democratic Harmony party, said it would again drag many Latvians into “debt slavery.”

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Moscow has already begun a hybrid war against Latvia

In words that some will dismiss as being like those of the little boy who cried wolf and that others will see as a cry of despair, Latvian TV journalist Olga Dragilyeva says that Moscow has launched a hybrid war against Latvia by using its media to generate “dissatisfaction and illusions” among the residents of Latvia. “For many years,” she said today, “Russian-language media controlled by the Russian government and NGOs connected with Russia have been cultivating dissatisfaction among the Russian-speaking part of the population” in order to “manipulate” Latvia from the outside. Dragilyeva says that the solution to this is to be found in the creation of a Latvian-organized television channel in Russian with its own correspondents “in Kyiv and Moscow, Washington and Latgale” and a commitment to providing the kind of accurate and reliable information about events in all those places that Russian-controlled channels don’t.

But some Latvians worry such a step may be too little too late. Martins Kaprans of the Latvian ministry of culture, says that Riga must take stronger measures against what he called “illegal satellite television.” Former MVD General Ainars Pencis adds that at a minimum Russian TV channels must be closed down for at least six months. Commenting on this, former Latvian General Guntars Abols acknowledged that Latvia today is “in a nervous situation,” one in which it is unclear “where there is peace and where there is war” given that Russia is exerting so much pressure on it and Latvia has relatively few resources with which to respond.

“Let us be realists,” he says. “Even if we introduced obligatory military service, we would not be able over the next 10 to 15 years to create armed forces capable of standing up to such an opponent who has overwhelming power in the conventional sphere” not to speak of anything else. Instead, Latvia must work with its allies and must be prepared at the first appearance of “’little men’ without designations on the uniforms” to fight. No delay is possible. This discussion highlights two fundamental problems which many do not want to take into consideration. On the one hand, Latvia does face a real and ongoing threat because of the impact of Russian media, something that has been ongoing and that by failing to build a Latvian Russian-language media that country has only compounded. And on the other, while ignoring this threat would be a mistake, talking about it in any but the most careful way may have exacerbate relations between various groups and regions in Latvia and thus may unintentionally play into the hands of the Moscow authors of Russia’s latest version of hybrid war in a television-saturated age. Indeed, that may be part of their strategy.

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Latvia’s Catholic bishops try to ‘stay calm’ amid Russian threat

Catholic officials in Latvia are trying to stay out of the region’s ideological war with neighbouring Russia. “Latvia is home to a large Russian population and there are Russian-speakers in the Catholic Church. We’re sensitive to historical animosities here, which could be reignited and used politically,” said Mgr Paul Klavins, spokesman for the bishops.

“It would be easy and dangerous for us to become involved in this ideological warfare – so our bishops have tried to stay calm and avoid taking sides,” he told the US Catholic News Service. “We know we’ll always have to live with our big neighbour, Russia – this is a historical reality. But we can do so in a friendly, peaceful way, even without much closeness,” he added.

In February, governments in Latvia, Lithuania and Estonia announced new security measures, including the reintroduction of conscription, against perceived dangers from Moscow. Mgr Klavins told CNS Latvia’s Catholic bishops had taken part in ecumenical prayers with Orthodox leaders for peace in war-torn Ukraine and had encouraged their clergy to emphasise “prayer, healing and reconciliation” in homilies and public statements.


       
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Emanuel Paparella2015-03-06 15:18:30
It would appear that the what is actually stopping Putin's Machiavellian "divide and conquer" policy toward the EU and the former Soviet satellites is the reality that those countries are now part of the EU and of NATO. It is shortsighted at best to do Putin's bidding and for the EU to disengage from NATO. That is exactly what Putin wants and his intentions, judging from his present actions, are not on the side of democracy and cultural diversity; if anything they are on the side of a new Cold War which may eventually escalate into a hot war. We live in a brave new world, indeed.


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