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Latvia

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  LATVIA

REPUBLICAN REFERENCE

Area (sq.km) 
64,589

Population
2,385,231

Principal 
ethnic groups 
Latvians 52.0%
Russians 34%
Belarusians 4.5%

Capital 
Riga

Currency 
Lats

President
Mrs Vaira 
Vike-Freiberga

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Background:
After a brief period of independence between the two World Wars, Latvia was annexed by the USSR in 1940. It reestablished its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 30% of the population) remains of concern to Moscow. Latvia continues to revamp its economy for eventual integration into various Western European political and economic institutions.

Update No: 262 - (22/10/02)

The Latvians had an election to parliament on October 5th. There was a startling, even if not surprising, result. The winner was the key reformer in Latvian politics for a decade or more since independence, Einars Repse, for long the chairman of the central bank.

Electoral turn-about
The ex-central banker leads a new party he formed only months after resigning his job, New Era. It is broadly centre-right in policy, as was Latvia's Way, the party of former Prime Minister Andris Berzins, which failed to reach the 5% barrier required for seats in parliament. It has suffered the fate of Solidarity in Poland, also eliminated from the political arena, after being in office for a decade.
Repse's New Era won 23.93% of the vote and will send 26 deputies to the 100-seat Saeima, Latvia's parliament. It will form an alliance with Latvia's First Party, another group of newcomers who won 10 seats on the strength of their anti-corruption campaign.
This agreement forged on October 8th, puts Repse in charge of the situation, eclipsing the second-runner, the left-wing coalition For Human Rights in a United Latvia, which won 18.94% of the votes and 24 seats, but which is the voice of the Russian minority and pro-Moscow in most Latvian eyes, and third-place finisher, the People's Party, staunchly pro-business which won 17% of the vote and 21 seats.
Repse is avoiding both of them, the one for its pro-Russian orientation, the other for its reputation for scandals, including dodgy privatisation deals, involving party leader and former premier Andris Skele, although these are still sub judice. It is just possible that he might agree to an accommodation with the People's Party. But he dislikes their insistence on a traditional coalition agreement of dividing up ministerial posts amongst the signatories. They smack too much of the old dispensation, power-sharing for the 'People.'
Repse is doing a daring thing. He is inclined to include the Greens and Farmers' Union, which won 12 seats and are clearly of massive integrity, whatever their understandable Eurosceptic sympathies. To have the Eurosceptics inside the coalition makes a lot of sense if the idea is to construct a new consensus. 
Another tantalising option is to go for the longstanding coalition players in almost all governments since 1991, For Fatherland and Freedom, who saw their parliamentary representation reduced from 16 to 7 in the election.
However it happens, Repse will obviously call the shots and is certain to prevail. His mandate is the more impressive because 72.4% of the 1.4m electorate bothered to turn out and vote. The 2002 election is a true watershed.

Repse the arch-reformer and manager
Repse is the key to the new regime. Something of an incorruptible, he is trusted by the population as above the normal political fray. Corruption became a big issue in the last few years, concerning the dodgy privatisation deals; hence the success of Latvia's First Party and indeed of Repse himself.
An austere central banker, Repse is concerned to fashion a new order in which accountability and character count for more than avowed policy. There is to be no revolution in policies, just in the manner of their application. Everyone agrees NATO and EU membership are the goals and pro-Western reforms the means.
The ex-banker has committed himself to form a 'non-traditional' coalition, in which he chooses ministers on their personal records rather than their party affiliations. He has been extremely reluctant to give portfolios to career politicians, floating instead names such as Gregorijs Krupnikovs, the former co-chairman of Latvia's Jewish Community, for foreign minister, and the former director of the states registry, Maris Gulbis, as interior minister.

Berzins valediction
The outgoing premier, Andris Berzins, had this to say: "We have been in power for 12 years and it is time for the pendulum to swing the other way. We got the blame and criticism for almost everything." That is the way it goes.

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BANKING

Nearly half of Latvian bank accounts held by foreigners

The percentage of non-residents depositing money in Latvia's commercial banks at the end of June reached 49.8 per cent of the total volume of deposits, and that is the highest figure in the Baltic states, according to data from the Association of Latvian Commercial Banks, LETA News Agency has reported.
In Lithuania, the percentage of non-resident depositors is much less, only 5.5 per cent, but in Estonia - 13.9 per cent. The total volume of such deposits in the Baltic States has dropped compared to the figure at the end of June last year. Last year, the number for Latvia was 50.9 per cent, Lithuania - 7.8 per cent and Estonia - 16.4 per cent.
By the end of June, Baltic commercial banks had drawn in 10.53bn euros (or 6.28bn lats). The breakdown among the banks in each country: Latvia 4.46bn euros (2.66bn lats), Lithuania - 3.09bn euros (1.84bn lats), Estonia - 2.98bn euros (1.78bn lats). The volume of personal deposits in Baltic commercial banks is at 4.44bn euros (2.65bn lats). Latvia has 23 banks, Lithuania - 14, Estonia - 7.

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ENVIRONMENT

Latvian premier on surprise visit to power plants finds environment damage

Prime Minister Andris Berzins, escorted by environmental specialists and representatives of nongovernmental organizations, paid a surprise visit to several small power plants on the Gauja River's upper reaches on 28th September, LETA News Agency has reported.
During the visit, several facts were revealed that prove substantial damage to the environment, errors in the work of state institutions and inadequate laws, the prime minister's press secretary Arnis Lapins has told LETA. The prime minister visited Varini, Gauja, Lacite and Pilskalni small power plants located on the Gauja's upper reaches, and the Dilles power generator on the Amata River, which is currently being constructed.
The prime minister's visit came as a complete surprise to the Varini power plant; others managed to learn about Berzins' inspection from other power plants' managers before the prime minister's arrival, Lapins said. Several problems that had been earlier reported to the prime minister by environmental protection organizations were detected during the visit. It was determined that regional environmental administrations had authorized projects that might do substantial damage to the environment. Neither is the flow of water controlled at small power plants. The prime minister believes that is a question of environmental inspectors.
According to Berzins, the construction of the Dilles power plant is a barbarity; it must be found out who authorized the construction. It has also been concluded that there are drawbacks in the legislation, because the procedure for halting such small power plants' operations is not regulated - the environmental protection law says that power plants are liquidated according to the procedure set by the respective laws, but no other law or regulation describes the procedure.
On, 30th September, the prime minister sent a resolution to Minister of Environmental Protection and Regional Development, Vladimirs Makarovs, asking a number of questions about small power plants and requesting the minister to pay particular attention to the construction of the Dilles power plant. As for the latter, the prime minister suspects negligence and, possibly, bribery. It is expected that the prime minister will propose a few amendments to the law.

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FINANCIAL NEWS

World Bank official: cooperation with Latvia to continue after it joins EU

Latvia's cooperation with the World Bank will not change greatly after the accession of Latvia to the European Union, the World Bank Central Europe and Baltic regional director has said, BNS News Agency has reported.
Roger Grawe told reporters, though, that with the country's well-being growing, Latvia's present status of a borrower country could change.
"Membership in the EU is not a factor affecting status of a country but the circumstances will change and it will also influence relationship with the country," said Grawe, who is on a visit to Latvia.
He added that membership of the EU doubtless will promote much faster development of Latvia and additional resources also will be available.
For now cooperation with Latvia continues in line with the country's interests and demand for the World Bank's help. Grawe said the bank's relations with Latvia already are of a much more specialized nature in extending assistance.
In the future the World Bank would focus more on areas promoting integration of Latvia in the EU, like education and health care, that at present are short of money.
Latvia's Economics Ministry has proposed to support projects aimed at developing a knowledge-based society promoting development of education and science. Grawe said the bank could support such projects this year, mainly by extending technical assistance in the sphere of consultations.
Grawe also praised Latvia's development supported by stable growth and tight fiscal discipline, characterized by the fact that during the year of the pre-election period agreement was reached to reduce the budget deficit from 2.7 per cent to 1.8 per cent.
Grawe has held the office of regional director since August. Latvia has been a World Bank member since 1992.

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FOREIGN ECONOMIC RELATIONS

Latvia signs industrial products conformity assessment agreement with EFTA

Latvia and the European Free Trade Association (EFTA) member states Iceland, Liechtenstein and Norway have signed in Brussels an agreement about recognition and conformity assessment of industrial products, expected to give Latvian producers greater export opportunities, BNS News Agency has reported.
Under the agreement Latvian industrial products will no longer be subject to additional testing in the said countries which will recognize quality certificates issued in Latvia.
Alongside with the agreement, the parties also signed supplements about electrical safety, electromagnetic compatibility, construction products and toys.
Previously Latvian producers willing to export their products to Norway, Iceland and Liechtenstein had to undergo additional conformity assessment procedures with a competent EU authority.
Latvia has also made a similar agreement with the EU.

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FOREIGN LOANS

Agreement signed on World Bank loan to Latvia

The end of September saw the signing of an agreement between Latvia and the World Bank in Washington DC on the loan of US$20m to Latvia for the implementation of the second structural reform programme supporting economic reforms in the Baltic state, BNS News Agency has reported.
The delayed loan will not be used immediately by Latvia, which is the first country to have received such a loan which is not set for specific projects, but rather for implementing government reform programmes.
Latvian Special Tasks Minister Roberts Zile's adviser, Iveta Bojare, said that the loan will be used if the state budget or market situation so demands.

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