Latvians’ Principal Concerns in Spring 2010: Economic Recession and Parliamentary Elections

Despite the fact that Latvia has been a mem­ber of the Euro­pean Union for six years, despite Latvia’s endorse­ment of the Lis­bon Treaty and simul­ta­ne­ous accep­tance of the col­lec­tive respon­si­bil­i­ty to imple­ment it, and despite the rel­e­vance for all EU mem­ber states of the deci­sions made in Brus­sels, most Lat­vians remain much more con­cerned about what is going on in Latvia than in the rest of Europe. In 2010, their atten­tion has been espe­cial­ly focussed on two issues:

  • cop­ing with and over­com­ing the country’s eco­nom­ic recession;
  • elect­ing a more cred­i­ble par­lia­ment than the cur­rent one.

After near­ly a decade of record Gross Domes­tic Prod­uct (GDP) growth, the Lat­vian econ­o­my shriv­elled in 2008. If, in 2007, the GDP growth rate, as com­pared with the pre­vi­ous year, was 10 per­cent, then, in 2008, the fig­ure was ‑4.2 per­cent. The downslide con­tin­ued into 2009 when the GDP was ‑18 per­cent.11Euro­stat: table of Real GDP Growth Rates for all EU mem­ber states, avail­able at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tsieb020&plugin=1 (last access: 14 July 2010). This was accom­pa­nied by ris­ing unem­ploy­ment: 6 per­cent of the labour force was job­less in 2007, 7.5 per­cent in 2008 and 17.1 per­cent in 2009.22Euro­stat: table on rates of unem­ploy­ment, avail­able at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tsiem110&plugin=1 (last access: 14 July 2010). The rea­sons for the dra­mat­ic decline of the econ­o­my were a com­bi­na­tion of short-sight­ed and impru­dent poli­cies at home, espe­cial­ly dur­ing the two suc­ces­sive pre­mier­ships (2 Decem­ber 2004 until 20 Decem­ber 2007) of Aigars Kalvītis (People’s Par­ty), and the fall­out of the finan­cial crises abroad. Esca­lat­ing pub­lic dis­con­tent forced Kalvītis and his cab­i­net to resign.

Ivars God­ma­n­is (Latvia’s First Par­ty – Latvia’s Way), became the next prime min­is­ter in Decem­ber 2007. The country’s pre­car­i­ous finan­cial sit­u­a­tion became crit­i­cal after the unex­pect­ed col­lapse in autumn 2008 of Parex Bank, Latvia’s sec­ond largest bank. Decid­ing to bail out the bank, the gov­ern­ment sought a loan. The response from the Euro­pean Com­mis­sion and the Inter­na­tion­al Mon­e­tary Fund (IMF) was quick and pos­i­tive. It was agreed that Latvia would bor­row 7.5 bil­lion Euros from the IMF and the EU. The first tranche in the amount of 600 mil­lion Euros from the IMF was trans­ferred to Latvia on 29 Decem­ber 2008. In return, both the gov­ern­ment and the par­lia­ment com­mit­ted them­selves to restruc­tur­ing the econ­o­my, includ­ing rais­ing tax­es, cur­tail­ing spend­ing, cut­ting salaries and wel­fare pay­ments and sys­tem­at­i­cal­ly repay­ing the loans received.33See, for exam­ple, the first Let­ter of Intent to the IMF from Latvia’s Prime Min­is­ter, Min­is­ter of Finance, Pres­i­dent of the Bank of Latvia, and Chair­per­son of the Finan­cial and Cap­i­tal Mar­ket Com­mis­sion, 6 Jan­u­ary 2009, avail­able at: http://www.delfi.lv/archive/article.php?id=22817410 (last access: 14 July 2010). For the pop­u­lace this meant dimin­ished incomes and high­er tax­es. Unable to make a seri­ous dent in resolv­ing Latvia’s eco­nom­ic prob­lems and beset by the polit­i­cal machi­na­tions of the par­ties rep­re­sent­ed in his gov­ern­ment, God­ma­n­is resigned in Feb­ru­ary 2009.

Pres­i­dent Vald­is Zatlers entrust­ed the for­ma­tion of the next cab­i­net of min­is­ters to Vald­is Dom­brovskis of the cen­tre-right oppo­si­tion par­ty, New Era. In order to ensure par­lia­men­tary back­ing for the unpop­u­lar deci­sions that had to be made, Dom­brovskis decid­ed to form a coali­tion cab­i­net, which includ­ed mem­bers of some of the par­ties rep­re­sent­ed in the past two gov­ern­ments. The result has been a frac­tious gov­ern­ment, buf­fet­ed by inter­nal strife and fre­quent attacks by var­i­ous polit­i­cal par­ties, not only those in the oppo­si­tion, but also those rep­re­sent­ed in the gov­ern­ment. Espe­cial­ly active in test­ing the government’s dura­bil­i­ty has been the People’s Par­ty, which par­tic­i­pat­ed in form­ing the coali­tion gov­ern­ment under Vald­is Dom­brovskis but sub­se­quent­ly con­cen­trat­ed on manoeu­vres designed to pol­ish its pub­lic image tar­nished dur­ing the years in which it ruled. Despite the res­ig­na­tion in March of all four People’s Par­ty min­is­ters and the sub­se­quent sys­tem­at­ic attacks of the People’s Par­ty politi­cians on the Dom­brovskis gov­ern­ment and those par­ties which con­tin­ue to sup­port it, the gov­ern­ment has con­tin­ued to do its job. More­over, Dom­brovskis has become one of the most trust­ed politi­cians in Latvia.

Some of the government’s poli­cies are show­ing hope­ful results. Accord­ing to the State Employ­ment Agency, in June, 15.8 per­cent of the labour force was unem­ployed, down 0.4 per­cent from May.44LETA dis­patch, 21 June 2010, avail­able at: http://zinas.nra.lv/ekonomika/latvija/25682-registreta-bezdarba-limenis-samazinajies-lidz-15–8.htm (last access: 14 July 2010). Growth has been report­ed in sev­er­al sec­tors of the econ­o­my dur­ing the first quar­ter of 2010, as com­pared with the same peri­od last year: man­u­fac­tur­ing up 6.8 per­cent, trans­porta­tion and com­mu­ni­ca­tions up 2.3 per­cent, agri­cul­ture up 5.9 per­cent, and ener­gy up 17.5 per­cent.55LETA dis­patch, 24 June 2010, avail­able at: http://www.delfi.lv/news/business/macroeconomics/komercbankas-rupnieciba-tuvakajos-gados-vilks-latvijas-ekonomiku.d?id=32670323 (last access: 14 July 2010). With the sig­nif­i­cant rise in exports, the cur­rent account bal­ance has also improved. Accord­ing to the Min­istry of Finance, income from var­i­ous tax­es dur­ing the first half of 2010 is more than had been planned. Improve­ments in Latvia’s eco­nom­ic sit­u­a­tion have also been observed by the IMF and the Euro­pean Com­mis­sion, which note in par­tic­u­lar the fast growth in exports and improved con­fi­dence in Latvia’s finan­cial mar­kets. While recog­nis­ing that the econ­o­my is begin­ning to sta­bilise, they also stress that Latvia must stay on its course; for exam­ple, next year the bud­get deficit must not exceed 6 per­cent and in 2012, Latvia should aim for a deficit of 3 per­cent. Suc­cess­ful imple­men­ta­tion of these and oth­er mea­sures would ensure that Latvia is ready to adopt the Euro in Jan­u­ary 2014.66LETA dis­patch, 7 June 2010, avail­able at: http://www.delfi.lv/archive/print.php?id=32362297 (last access: 14 July 2010). Latvia’s join­ing the Euro­zone coun­tries in 2014 is one of the goals of the Dom­brovskis government.

The prin­ci­pal chal­lenge of the God­ma­n­is’ and Dom­brovskis’ gov­ern­ment, and the main source of polit­i­cal dis­cord and pub­lic dis­gruntle­ment, has been bal­anc­ing the bud­get so as to meet at least the min­i­mal needs of the pop­u­lace while slash­ing expen­di­tures in order to com­ply with the con­di­tions agreed upon with the IMF and the EU. This task has required the gov­ern­ment to make painful deci­sions. Com­mon sense tells us that it is nev­er easy for polit­i­cal par­ties to adopt unpop­u­lar mea­sures; in an elec­tion year, how­ev­er, this is high­ly risky for any polit­i­cal par­ty want­i­ng to do well at the bal­lot box. The next par­lia­men­tary elec­tions in Latvia will take place on 2 Octo­ber 2010. All these fac­tors shed light on why Lat­vian politi­cians have found it so hard to adopt deci­sions that are good for the coun­try but dis­liked by many vot­ers and why they devote so much atten­tion to reju­ve­nat­ing their pub­lic image while dis­so­ci­at­ing them­selves from past mis­takes and unpop­u­lar policies.

How­ev­er, the deep dis­sat­is­fac­tion with the cur­rent par­lia­ment and the dis­trust of politi­cians in gen­er­al start­ed well before the eco­nom­ic reces­sion set in. After the par­lia­men­tary elec­tions of 2006, four polit­i­cal par­ties decid­ed to coop­er­ate and form a coali­tion: People’s Par­ty (23 deputies), Green and Farm­ers’ Par­ty (18 deputies), Latvia’s First Par­ty – Latvia’s Way (10 deputies) and For Father­land and Freedom/LNNK (8 deputies). Togeth­er they had 59 votes and formed a sol­id major­i­ty in the 100-mem­ber par­lia­ment. Under the strong lead­er­ship of the People’s Par­ty, the cen­tre-right rul­ing coali­tion could and did con­trol the deci­sion-mak­ing in the par­lia­ment. Mem­bers of the rul­ing coali­tion also formed the gov­ern­ment from autumn 2006 to Feb­ru­ary 2009. The rul­ing coali­tion became arro­gant and tend­ed to reject out­right any pro­pos­als, regard­less of qual­i­ty, from the grass roots or the two oppo­si­tion par­ties: the New Era with 18 deputies and the Har­mo­ny Cen­tre with 17 deputies. Such behav­iour, some­times char­ac­terised as a dic­ta­tor­ship of the major­i­ty, served to alien­ate the four par­ties from the vot­ers. Fur­ther­more, the parliament’s deci­sions were often crit­i­cised as ben­e­fit­ing spe­cial inter­ests more than the coun­try as a whole. With the arrival of the reces­sion, pub­lic con­fi­dence in the par­lia­ment as a whole, and mem­bers of the rul­ing coali­tion in par­tic­u­lar, sank even fur­ther. In spring 2010, if pub­lic opin­ion polls are to be believed, the re-elec­tion to the par­lia­ment seemed cer­tain only for the oppo­si­tion par­ties, and quite unlike­ly for the par­ties of the rul­ing coalition.

Con­se­quent­ly, var­i­ous forms of activ­i­ties attrib­ut­able to an elec­tion year start­ed already in ear­ly 2010. Seri­ous cam­paign­ing, how­ev­er, can­not begin until after the par­ties sub­mit their lists of can­di­dates to the elec­tion board in the peri­od between 14 July and 3 August 2010 and each can­di­date has been found to meet the nec­es­sary require­ments. Nev­er­the­less, all par­ties have been work­ing hard to refur­bish their pub­lic image. In order to raise their chances of rep­re­sen­ta­tion in the par­lia­ment, many par­ties, regard­less of size and ear­li­er stature, have decid­ed to run in the elec­tions under a sin­gle ban­ner and present their can­di­dates on one list. Thus, for exam­ple, three polit­i­cal par­ties (New Era, Civic Union and Soci­ety for Dif­fer­ent Pol­i­tics) and some polit­i­cal inde­pen­dents joined forces to form the elec­tion alliance “Vienotī­ba” (Uni­ty) and the left-of-cen­tre par­ties favoured by the Russ­ian-speak­ing pop­u­la­tion decid­ed to run togeth­er as the Har­mo­ny Par­ty. Oth­er par­ties have fol­lowed this trend and are form­ing their own elec­tion alliances. Per­haps the most remark­able is the asso­ci­a­tion “Par labu Latvi­ju” (For A Good Latvia), com­prised of the People’s Par­ty, Latvia’s First Par­ty – Latvia’s Way, and sev­er­al small region­al par­ties. Its nick­name is “AŠ²” because of the first ini­tials of its lead­ing per­son­al­i­ties, Andris Šķēle (People’s Par­ty) and Ainārs Šle­sers (First Par­ty – Latvia’s Way). Both are strong-willed, suc­cess­ful busi­ness­men with per­son­al wealth in the mil­lions of lats; both like to be in pol­i­tics, to be in charge and have a rep­u­ta­tion for pro­tect­ing above-all their own and their par­ties’ inter­ests. At first glance, Šķēle and Ainārs Šle­sers seem unlike­ly can­di­dates for a polit­i­cal part­ner­ship. Yet both are the lead­ers of par­ties whose rat­ings have fall­en so low that their future is in jeop­ardy. Thus, the prin­ci­pal motive for the People’s Par­ty and Latvia’s First Par­ty not to run in the elec­tions on their own, but under the ban­ner of the new­ly formed “For A Good Latvia” is prag­mat­ic: they see that they have bet­ter chances of polit­i­cal sur­vival by pool­ing forces and retool­ing their pub­lic image.

Many vot­ers, on the one hand, wel­come the for­ma­tion of elec­tion alliances by the numer­ous par­ties because this would put some order in Latvia’s mot­ley polit­i­cal land­scape and ensure that more votes have gen­uine impact in the elec­tions – in Latvia, after all the bal­lots are count­ed, the votes for par­ties not receiv­ing at least 5 per­cent of the total bal­lots cast (min­i­mum require­ment for rep­re­sen­ta­tion in the par­lia­ment) are pro­por­tion­ate­ly divid­ed among the par­ties which sur­pass the 5 per­cent bar­ri­er. On the oth­er hand, many vot­ers also feel frus­trat­ed and unsure because it is not yet clear which elec­tion alliance stands for a fresh start and more cred­i­ble can­di­dates or which one mere­ly pro­vides a new umbrel­la for sea­soned politi­cians wish­ing to retain their seats in the par­lia­ment. The vot­ers want pos­i­tive change and they do not yet see how to achieve it. The mood of Latvia’s elec­torate in spring 2010 could, there­fore, be described as scep­ti­cal interest.

    Footnotes

  • 1Euro­stat: table of Real GDP Growth Rates for all EU mem­ber states, avail­able at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tsieb020&plugin=1 (last access: 14 July 2010).
  • 2Euro­stat: table on rates of unem­ploy­ment, avail­able at: http://epp.eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tsiem110&plugin=1 (last access: 14 July 2010).
  • 3See, for exam­ple, the first Let­ter of Intent to the IMF from Latvia’s Prime Min­is­ter, Min­is­ter of Finance, Pres­i­dent of the Bank of Latvia, and Chair­per­son of the Finan­cial and Cap­i­tal Mar­ket Com­mis­sion, 6 Jan­u­ary 2009, avail­able at: http://www.delfi.lv/archive/article.php?id=22817410 (last access: 14 July 2010).
  • 4LETA dis­patch, 21 June 2010, avail­able at: http://zinas.nra.lv/ekonomika/latvija/25682-registreta-bezdarba-limenis-samazinajies-lidz-15–8.htm (last access: 14 July 2010).
  • 5LETA dis­patch, 24 June 2010, avail­able at: http://www.delfi.lv/news/business/macroeconomics/komercbankas-rupnieciba-tuvakajos-gados-vilks-latvijas-ekonomiku.d?id=32670323 (last access: 14 July 2010).
  • 6LETA dis­patch, 7 June 2010, avail­able at: http://www.delfi.lv/archive/print.php?id=32362297 (last access: 14 July 2010).

The reports focus on a report­ing peri­od from Decem­ber 2009 until May 2010. This sur­vey was con­duct­ed on the basis of a ques­tion­naire that has been elab­o­rat­ed in March and April 2010. Most of the 31 reports were deliv­ered in May 2010.

The EU-27 Watch No. 9 receives sig­nif­i­cant fund­ing from the Otto Wolff-Foun­da­tion, Cologne, in the frame­work of the ‘Dia­log Europa der Otto Wolff-Stiftung’, and finan­cial sup­port from the Euro­pean Com­mis­sion. The Euro­pean Com­mis­sion is not respon­si­ble for any use that may be made of the infor­ma­tion con­tained therein.