Having recently returned from a week-long holiday in the Latvian Baltic sea resort of Jurmala, I felt the stark contrast between a wonderful summer holiday destination and the signs of an epic economic crisis. On the one hand I was impressed at the hospitality and pleasantness of this tiny Baltic Sea town, 20km from the capital Riga, which is very inviting with its wild dunes and beautiful sunsets on the evening horizon. On the other hand, I could not help but notice the extent to which Latvia’s economic crisis has become an accepted everyday reality among the populace.

Admittedly, being stranded in Jurmala, it is difficult to claim that I had much insight into the state of affairs of the local economy. Jurmala certainly has appeal with plenty of sun, a beach, fancy cars, delicious (and cheap) food and large villas. Having joined the Schengen agreement in December 2007, Latvia is now an easy travel destination for Russian passport holders. As part of the former Soviet bloc, hotel and restaurant personnel remain fluent in Russian. Infrastructure in this resort has been upgraded over the past few years, with a ride to the airport taking less than 30 minutes. It is therefore not difficult to see how the summer months attract Russian speakers who flock to Jurmala.

While tourism in Riga’s medieval old town has long been multinational, Jurmala is predominantly Russian speaking – somewhat of a Russo-phone Malibu. From old cars with Belorussian number plates to the latest Mercedes or Porsche convertible carrying Moscow license plates, holidaying in Jurmala has become trendy and fashionable during the high season. Indeed, the annual New Wave concert – a mini-Eurovision event featuring Russian-speaking pop-stars from across the entire former-Soviet empire and beyond – takes place in Jurmala every summer, and has become a regular venue for long-forgotten Western pop fossils – this year featured Swedish band Roxette!

However, given the economic mess Lativa is currently in, this small Baltic jewel (amber would be more appropriate given the region’s large amber industry) will unlikely be able to stave off the wrath of the economic hardship facing the local population. To secure EU and IMF funding, the Latvian authorities had to commit to a set of austere fiscal measures, leading to deep wage cuts across the public sector to the tune of 40%. A local lawyer informed me that these wage cuts have caused public administration and bureaucracy to come to a complete standstill. During my visit I saw numerous empty houses with ‘sale’ signs on the fences. In several instances construction of these houses has not even been completed as developers must have run into financing difficulties. I was struck by the lack of activity at Riga’s sea port, which likely has seen busier days, and the amount of sale signs across the newly-built malls.

In one instance I saw a car carrying a plaque reading: ‘to hell with the crisis’ in Russian. I remind the reader of the recent anti-crisis blondes’ parade, which took place in Riga, in which a thousand blonde women paraded through the streets of Riga to express their opposition to the economic crisis and calling on a brighter future. As persuasive as such a parade may be to the foreign observer, my colleagues at BMI inform me that a devaluation of the Latvian lat is a question of when, not if. Under such a scenario, the economic hardships facing Latvians have yet to unfold. For the time being, though, Risk Watchdog has every intention to return to Riga and Jurmala, and enjoy this amber in the rough.