In Latvia, Riga has become a ghost town

The third-poorest country in the EU, Latvia punitive welfare conditions and the exclusion of Russian-speakers from surrounding nations has lead to a depopulation of 30,000 a year.

Early this year, Latvia’s parliament voted to join the eurozone. The country has endured two economic shocks in recent decades – in the early 1990s and in 2008, when it had the deepest recession in the world. Growth and eurozone membership in January 2014 are supposedly the reward.
 
Some measure of Latvians’ real feelings can be taken in the results of the local elections in June, won decisively by the social-democratic Harmony Centre, which ran on an antiausterity platform. Yet Latvian national politics is marked by a division between ethnic Latvians and the Russian speakers – people of Russian, Belarusian and Ukrainian descent –who make up a third of the population. Thousands of these are denied citizenship and do not have the right to vote.
 
Harmony Centre is dismissed as a Russian party by the ruling coalition of neoliberals and the far-right National Alliance and remains in opposition, despite winning more seats than any other single party in the 2011 parliamentary election.
 
Latvia is the third-poorest country in the EU; 12.8 per cent of the adult population is unemployed. The dole lasts only nine months. Youth unemployment has almost halved from a peak of 42 per cent in 2010 – but soon the government, apparently following the UK’s lead, plans to turn welfare into workfare, with forced jobs such as road sweeping. The result has been depopulation. Approximately 30,000 people a year are leaving Latvia. Those who migrate are young and often well educated.
 
The effects are visible in the capital, Riga. A few minutes by tram outside the old town, which is showered with public money, a different reality emerges. Areas such as the Moscow District are crammed with crumbling tenements and emptywooden houses; it could be the set for a ghost town in a low-budget western. The dereliction is leavened only by alcohol and second-hand clothes shops. Among this are budget hotels to cater for the stag-party trade, which completely ignores the deprivation all around.
 
Official history is sliding backwards, too, with rising ethnic nationalism leading to events such as the absurd annual commemoration of Latvian Waffen SS divisions as a necessary evil, undertaken to fight the Soviets.
 
The anti-Russian politics is only a veil. Behind it is an attempt to justify privatisation and austerity. Despite its crisis, the eurozone has a special attraction for the former communist countries that have found themselves among the happy few in the EU since 2004. Estonia, Slovakia and Slovenia all joined the euro – this was proof to some that they had finally vanquished the “ghosts of communism” and were showing their true worth.
 
Latvians are often compared favourably with the Greeks as thosewho meekly accepted austerity and are now reaping the rewards. Yet that lack of resistance stemmed from the cynical manipulation of ethnic differences – which is now dividing Latvian society. 
A man walks by a currency exchange in Riga. Photograph: Getty Images.

Agata Pyzik is a Polish writer publishing in Polish and English in many publications in the UK and in Poland, including the Guardian, Frieze and The Wire. Her main interest is (post) communist Eastern Europe, its history, society, art. She's finishing a book on postcommunism called Poor But Sexy for Zero Books. She lives in London and has a blog.

This article first appeared in the 19 August 2013 issue of the New Statesman, Why aren’t young people working

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I was wrong about Help to Buy - but I'm still glad it's gone

As a mortgage journalist in 2013, I was deeply sceptical of the guarantee scheme. 

If you just read the headlines about Help to Buy, you could be under the impression that Theresa May has just axed an important scheme for first-time buyers. If you're on the left, you might conclude that she is on a mission to make life worse for ordinary working people. If you just enjoy blue-on-blue action, it's a swipe at the Chancellor she sacked, George Osborne.

Except it's none of those things. Help to Buy mortgage guarantee scheme is a policy that actually worked pretty well - despite the concerns of financial journalists including me - and has served its purpose.

When Osborne first announced Help to Buy in 2013, it was controversial. Mortgage journalists, such as I was at the time, were still mopping up news from the financial crisis. We were still writing up reports about the toxic loan books that had brought the banks crashing down. The idea of the Government promising to bail out mortgage borrowers seemed the height of recklessness.

But the Government always intended Help to Buy mortgage guarantee to act as a stimulus, not a long-term solution. From the beginning, it had an end date - 31 December 2016. The idea was to encourage big banks to start lending again.

So far, the record of Help to Buy has been pretty good. A first-time buyer in 2013 with a 5 per cent deposit had 56 mortgage products to choose from - not much when you consider some of those products would have been ridiculously expensive or would come with many strings attached. By 2016, according to Moneyfacts, first-time buyers had 271 products to choose from, nearly a five-fold increase

Over the same period, financial regulators have introduced much tougher mortgage affordability rules. First-time buyers can be expected to be interrogated about their income, their little luxuries and how they would cope if interest rates rose (contrary to our expectations in 2013, the Bank of England base rate has actually fallen). 

A criticism that still rings true, however, is that the mortgage guarantee scheme only helps boost demand for properties, while doing nothing about the lack of housing supply. Unlike its sister scheme, the Help to Buy equity loan scheme, there is no incentive for property companies to build more homes. According to FullFact, there were just 112,000 homes being built in England and Wales in 2010. By 2015, that had increased, but only to a mere 149,000.

This lack of supply helps to prop up house prices - one of the factors making it so difficult to get on the housing ladder in the first place. In July, the average house price in England was £233,000. This means a first-time buyer with a 5 per cent deposit of £11,650 would still need to be earning nearly £50,000 to meet most mortgage affordability criteria. In other words, the Help to Buy mortgage guarantee is targeted squarely at the middle class.

The Government plans to maintain the Help to Buy equity loan scheme, which is restricted to new builds, and the Help to Buy ISA, which rewards savers at a time of low interest rates. As for Help to Buy mortgage guarantee, the scheme may be dead, but so long as high street banks are offering 95 per cent mortgages, its effects are still with us.