Latvia faces tough post-boom hangover

“Their awful investments and plain stupidity led us to this,” she told AFP. More than 10,000 teachers flooded central Riga on April 2,protesting against impending wage cuts as the government scrambled to get a slice of the 7.5-billion-euro bailout it won from the International Monetary Fund and other lenders in December.

Labour unions across the economy have threatened more protests. Under the package,the Latvian government has to slash spending to try to bridge a yawning deficit. It has already made deep cuts that,along with those on the horizon,could mean spending 12 percent less than planned this year.

“It is very difficult to do and it is very unusual,” said Morten Hansen,a professor at the Riga branch of the Stockholm School of Economics. On April 2,the government announced it had missed out on a 200-million-euro tranche from the IMF. The lender acted after Riga failed to amend its budget in time — leading to speculation that the bailout could unravel.

“This is a ‘chase your shadow’ case,since as you cut,so the economy contracts more,so the more you need to cut,” economist Edward Hugh said.

Centre-right Prime Minister Valdis Dombrovskis has warned that Riga could go bankrupt in June if it fails to receive the promised cash. He has so far been unable to persuade lenders to grant him some leeway. Dombrovskis came to power in March,after his predecessor Ivars Godmanis quit following violent demonstrations in January and a rebellion within his coalition — nothing unusual in a country that has had 15 governments since independence from the Soviet Union in 1991.