Even within Europe, after all, perceptions of economic policy can vary a great deal, as a quick comparison of Latvia and Greece reveals. Recently, the former has received some well-earned attention for its successful pursuit of economic austerity. In the wake of the 2008 crash, the Latvian government slashed public spending, fired a third of its civil servants, and reduced salaries of those remaining while refusing to inflate the currency. GDP declined dramatically, falling 24 percent in two years. And then the recovery began. The Latvian GDP is now growing at more than 5 percent, and the budget deficit has been dramatically reduced.
And the Latvians? As their economy plunged in 2010 and 2011, there were no strikes, no protests, no fury. Not only did the nation accept austerity, it re-elected the prime minister who imposed it. In Greece, by contrast, smaller budget cuts (relatively) have led to a smaller GDP decline (18 percent since the crisis began) but also to strikes and riots. The Greeks have voted their politicians out of office more than once, formed a new fascist party, and thrown petrol bombs at banks. Meanwhile, their economy has not recovered.
There are some good technical explanations for the differences. Anders Aslund of the Peterson Institute
notes rightly that austerity in Greece and Latvia was applied differently. The Latvians hit bureaucrats hard, but pensioners less so. They also made the biggest cuts right away. Aslund argues that drawing out a crisis creates more pain over time: The Greeks have protected their state sector, made cuts slowly, and never convinced either their public or their creditors of their commitment. Uncertainty therefore persists; people and capital continue to flee the country.
But the differences between Latvia and Greece also lie in history, in culture, and, again, in emotion and national psychology. Latvia is small, homogenous, accustomed to hardship—it endured half a century of Soviet occupation—and is fiercely dedicated to its independence. It's also in the North.
As one Riga trade unionist explained, "What can you achieve in the street? It is cold and snowing." Greece is bigger, less cohesive, and politically divided. It has also been bailed out by the rest of Europe, politically and economically, multiple times in the past half-century. And, of course, it's in the South. You might be cold if you can't pay your heating bill in Athens, but you won't freeze to death. Maybe this diminishes the sense of urgency.
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