Who would borrow 200 lats to repay one thousand or even three after one year? Latvians, however, are making this unbelievable choice ever more often. While many have yet to recover from the crisis, the quick credit business is fully enjoying the economic “pick-up” and earns millions. Usury or predatory lending is punishable with imprisonment, but Latvia, unlike Estonia and Lithuania, has never limited the business’ fantastic interest rates. At least until now–but the situation has already reached its limit.

When the bustle of Bergen, a large Norwegian city on the country’s west coast, recedes into the night, Inese Liepina and her husband Peteris go to work. Around midnight, Peteris stacks about 1,000 newspapers into Ineses trunk, and about 6,000 into his own. He then gently lifts his wife into her car. As he watches her drive off, he has a lot of worries on his mind. Inese is not used to driving the steep hills of Norway. The chronic pain in her back flares up, as she gets in and out of the car to climb the 12-story bloc apartment buildings to deliver heavy newspaper packets.

When a year ago, Dzintra Briede got divorced, lost her job and all of her income, this mother of four moved in with her father, who lives in the small village of Bunka, in the Western Latvia. Turns out that in this region of Latvia, Dzintra’s family is considered “rich.”

This week Latvia lost another family. The Birgelis family from Puikules moved to Germany to start a new life, as they couldn’t earn enough money even for bread in Latvia. The story from Puikule: about those that have left and the people who remain.

he richest 1% of Latvian households earn on average 3018Ls while the bottom 90% of households earn on average 425 Ls per month.

Latvia’s painful austerity program and recent economic growth is presented to the world as a success story and a model for other struggling countries resisting cuts. Re:Baltica’s investigation finds that Latvia has some of the highest poverty, unemployment and income inequality rates in the EU. What can other countries learn from Latvia to avoid the high human costs of its political choices?

At present Latvia’s municipalities set separately the amount and organization of welfare payments. These payments therefore vary greatly according to the revenues of the municipalities. In poorer regions welfare payments are negligible. The World Bank‘s research shows that municipalities paid out most of the housing benefits to wealthier families, with the state supervisory authority being too passive to change the system.

What should be done to improve the lives of those with low-incomes and to reduce social inequality? Here are the main conclusions and expert’s recommendations.

Latvia is a land of extremes. In a country where 42% of children live at risk of poverty and social exclusion, the state can afford to pay 142,000 euros in paternity benefits for one child, and 200,000 euros in unemployment benefits. The Latvian system of taxes and benefits supports its rich more than the poor, leading to the highest income inequality in the EU. Re:Baltica investigates – how did Latvia get there?