Political uncertainty and economic recession

At the begin­ning of 2009 Latvia is fac­ing polit­i­cal uncer­tain­ty and the onset of what is like­ly to be deep eco­nom­ic reces­sion. Pub­lic dis­course tends to con­cen­trate on those two gen­er­al themes.

The cur­rent polit­i­cal uncer­tain­ty is close­ly linked with that fact that the nation­al gov­ern­ment as well as the par­lia­ment and polit­i­cal par­ties no longer enjoy the public’s con­fi­dence. Accord­ing to an opin­ion poll, pub­lished in late Jan­u­ary 2009, 64 per­cent of Latvia’s cit­i­zens would favour dis­solv­ing the parliament.[1] Anoth­er pub­lic opin­ion poll in Decem­ber 2008, reveals that 51 per­cent of the peo­ple were total­ly dis­sat­is­fied with the per­for­mance of the gov­ern­ment and only 10 per­cent said that they were satisfied.[2]

This is the low­est rat­ing of any gov­ern­ment since 1996 when thou­sands of Lat­vians lost their life’s sav­ings owing to the fold­ing of “Ban­ka Baltija”.

Pub­lic con­fi­dence – while nev­er par­tic­u­lar­ly high – in elect­ed rep­re­sen­ta­tives, offi­cials and polit­i­cal par­ties, espe­cial­ly at the nation­al lev­el in Latvia, start­ed to erode steadi­ly about a year after the par­lia­men­tary elec­tions of Octo­ber 2006. The People’s Party[3] won the great­est num­ber of seats and formed a coali­tion with oth­er right-of-cen­tre par­ties, except the New Era.[4] Owing to strict dis­ci­pline, the coali­tion could decide any issue before the par­lia­ment. The coalition’s dis­re­gard for the views of the polit­i­cal oppo­si­tion and prover­bial man in the street, elicit­ed com­plaints from the elec­torate of a dic­ta­tor­ship of the major­i­ty in the par­lia­ment and pub­lic peti­tions in spring 2008 to change the con­sti­tu­tion so as to per­mit the elec­torate to ini­ti­ate the dis­so­lu­tion of the parliament.

Aigars Kalvītis (People’s Par­ty), who had been a very self-con­fi­dent Prime Min­is­ter from 2004 to 2006, was asked again to form the new gov­ern­ment in autumn 2006 after the par­lia­men­tary elec­tions. In his sec­ond tenure as Prime Min­is­ter, he was not­ed for his arro­gance and high-hand­ed­ness; his gov­ern­ment – for being deaf to the voice of the elec­torate. Owing to wide­spread pub­lic com­plaints, Kalvītis resigned in Decem­ber 2007. He man­aged, nonethe­less, to ensure that the reins of pow­er remain in the hands of the exist­ing rul­ing coali­tion. Ivars God­ma­n­is of Latvia’s Way-Latvia’s First Party[5] became the next Prime Min­is­ter. Par­ty pol­i­tics deter­mined the choice of min­is­ters in the cab­i­net rather than pro­fes­sion­al com­pe­tence and good rep­u­ta­tion as a pub­lic ser­vant. This was demon­strat­ed by the government’s inabil­i­ty to act prompt­ly to reduce the risks of an over­heat­ed econ­o­my – these dan­gers were already per­cep­ti­ble dur­ing the years before God­ma­n­is became Prime Min­is­ter. Not hav­ing the full back­ing of his gov­ern­ment, God­ma­n­is was not able to imple­ment the hard deci­sions, which in his opin­ion were nec­es­sary to try to sta­bilise Latvia’s economy.

Ear­ly in Novem­ber 2008 it became pub­lic knowl­edge that “Parex Bank”, Latvia’s sec­ond largest bank, was unable to meet the pay­ment sched­ule on the syn­di­cat­ed loans that it had tak­en. The government’s deci­sion to bail out the bank revealed the pre­car­i­ous state of Latvia’s econ­o­my as a whole. Latvia did not have the resources for the bailout and need­ed out­side finan­cial assistance.

This news fur­ther under­mined pub­lic con­fi­dence in the gov­ern­ment and the par­lia­ment and served to encour­age more demon­stra­tions by farm­ers and oth­er groups encoun­ter­ing eco­nom­ic dif­fi­cul­ties. A large demon­stra­tion demand­ing change, includ­ing the dis­so­lu­tion of the par­lia­ment, was announced for 13 Jan­u­ary 2009. The organ­is­ers were polit­i­cal oppo­nents of the rul­ing coali­tion. Despite the freez­ing tem­per­a­tures many thou­sands of peo­ple gath­ered in the his­toric cen­tre of Rīga and peace­ful­ly voiced their com­plaints and demands. Just as the demon­stra­tion was end­ing, groups of most­ly ine­bri­at­ed young peo­ple head­ed for the par­lia­ment and tried to storm the build­ing. Fail­ing to suc­ceed, they turned to oth­er vio­lent activ­i­ties, rem­i­nis­cent of the riots in oth­er Euro­pean cap­i­tals in recent years. The Lat­vian pub­lic was shocked and could not believe that this could hap­pen in Rīga. The gov­ern­ment and the rul­ing coali­tion in the par­lia­ment react­ed by ignor­ing the griev­ances of the demon­stra­tors and by deplor­ing the dis­or­ders and cast­ing the blame on the organ­is­ers of the demonstration.

Pres­i­dent Zatlers react­ed on 14 Jan­u­ary 2009 by accus­ing the gov­ern­ment and the par­lia­ment of los­ing sight of the peo­ple and asked deputies to revise the law on par­lia­men­tary elec­tions, vot­ing on amend­ments to the con­sti­tu­tion allow­ing the vot­ers to ini­ti­ate the dis­so­lu­tion of the par­lia­ment, and estab­lish­ing a coun­cil to mon­i­tor the spend­ing of the loans from abroad and the imple­men­ta­tion of the plan to sta­bilise the econ­o­my. He asked that these tasks be com­plet­ed by the end of March, oth­er­wise he could con­sid­er dis­miss­ing the par­lia­ment so as to per­mit new elections.[6] After com­plain­ing loud­ly about the President’s ulti­ma­tum, the par­lia­ment has been attend­ing to the three tasks.

In the mean­while, dis­cord among the politi­cians of the rul­ing coali­tion was grow­ing, espe­cial­ly over the suit­abil­i­ty of God­ma­n­is as the Prime Min­is­ter. Dis­con­tent had also been expressed by the Pres­i­dent. Final­ly on 20 Feb­ru­ary 2009 the People’s Par­ty and the Green[7] and Farm­ers’ Party[8] decid­ed to call for the res­ig­na­tion of the Prime Min­is­ter; lat­er that day, the Prime Min­is­ter God­ma­n­is stepped down. Pres­i­dent Zatlers has asked Vald­is Dom­brovskis of the oppo­si­tion right-of cen­tre New Era Par­ty to form a new government.

The most urgent tasks of the new gov­ern­ment will be to ward off the threat of bank­rupt­cy and to regain pub­lic con­fi­dence in the gov­ern­ment. Toward these ends the new min­is­ters will have to lis­ten close­ly to the elec­torate and make the deci­sions that are best for the coun­try. Regard­ing the econ­o­my, the new gov­ern­ment will have to show that Latvia is meet­ing the con­di­tions for receiv­ing the promised loan of 7.5 bil­lion Euro from the Inter­na­tion­al Mon­e­tary Fund. This will entail draft­ing a viable pro­gramme to sta­bilise the econ­o­my and adopt­ing prompt­ly very unpop­u­lar mea­sures, such as cut­ting the bud­get by at least 20 per­cent, so as to ward off the threat of bank­rupt­cy. The dead­line is the end of March. The imple­men­ta­tion of these steps will also ensure the smooth allo­ca­tion of the promised assis­tance from the Euro­pean Com­mis­sion, to be dis­trib­uted in parcels in the years from 2009 to start­ing with 2.9 bil­lion Euro in the first years and fol­lowed by 100 mil­lion Euro in 2010 and 2011.[9]




[1] BNS, news agency: dis­patch of 24 Jan­u­ary 2009.
[2] LETA, news agency: dis­patch of 3 Feb­ru­ary 2009.
[3] Tau­tas Partija.
[4] Jau­nis laiks.
[5] Latvi­jas Ceļš.
[6] Delfi, news agency: dis­patch of 14 Jan­u­ary 2009.
[7] Latvi­jas Zaļā Partija.
[8] Cen­triskā par­ti­ja Latvi­ja Zem­nieku Savienība.
[9] LETA, news agency: dis­patch of 30 Jan­u­ary 2009.