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Books on Latvia
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Update No: 314 - (22/02/07)
The Baltic tiger ride
Latvia is basically doing phenomenally well with the fastest-growing economy in
Europe, GDP rising 12% last year.
But it is still embroiled with Russia. Russians amount to one third of the
population and predominate in the six largest cities.
A new coalition government, formed on February 6th, has taken on the mayor of
the largest of them, the capital, Riga, and wants his dismissal. Latvia has a
new coalition government from time to time, which nevertheless always carry on
their predecessors' policies underpinning the growth effort.
Latvia's economic growth hits 12 per cent in 2006
Latvia's economy continued to surge last year, with gross domestic product
growth hitting 11.9 per cent, government officials said on February 9th. The
achievement was likely the best in the European Union, which the Baltic country
joined in 2004.
Latvia's economy, traditionally the poorest in the bloc based on GDP per capita,
has been expanding rapidly for several years because of strong growth in the
retail, construction, real estate and telecommunication sectors. But economists,
including those at the country's central bank, have warned of possible
overheating. Many say that strong consumer demand endangers the country's
ability to produce enough which threatens a widening current account deficit.
But the government appears satisfied. "I'm gratified that competitiveness
of Latvia's businessmen is growing" Economy Minister, Jurijs Strods, told
the Baltic News Service. "Step by step we are moving toward Latvia's
national ... goals to continue economic growth and increase the level of
employment.
However, high inflation continues to plague Latvia, with recent figures showing
that in January it amounted to more than 7 per cent, one of the highest rates in
the EU.
The Riga-Moscow fracas
Until recently, border talks were stalled between Latvia and Russia.
A Latvian-Russian border treaty dating back to 1997 remains unsigned and
un-ratified because Latvian politicians sought to link the border settlement to
a declaration from Russia admitting Soviet aggression during World War II, as
well as concessions on other issues.
Latvia included a unilateral explanatory declaration to the draft border treaty,
which allows it to claim Russian territory - the Pytalovo District in the Pskov
Region - that was part of Latvia before World War II and was annexed by Russia
in 1944. In 2005 Russia refused to sign the border treaty with Latvia, since the
Latvian government wished to add to the treaty a declaration containing a
reference to the 1920 Latvian-Russian Peace Treaty under which the Abrene county
(now Pytalovo) belongs to Latvia.
But Latvian Prime Minister, Aigars Kalvitis, said in January that his country
would not attach any extra declarations to the treaty.
Government secures Saeima's mandate to sign border treaty with Russia
Indeed, the Latvian parliament [Saeima] in the final reading passed a bill on
February 9th authorizing the government to sign the border treaty with Russia
without the explanatory declaration that Latvia previously wanted to attach to
the document.
During the final vote, 69 parliament members voted "for" and 26 voted
"against" with no abstentions.
Those MPs who voted against the bill included all lawmakers from the opposition
centre-right New Era party and the nationalist alliance For Fatherland and
Freedom/LNNK (TB/LNNK), as well as Visvaldis Lacis and Leopolds Ozolins from the
Greens and Farmers Union (ZZS).
A total of 13 proposals had been submitted for the second reading of the draft
law, of which lawmakers approved only one submitted by the parliament legal
affairs committee.
However, the new wording of the bill says that considering Latvia's
constitutional bill on the sovereign status of the Republic of Latvia passed on
August 21th, 1991, and the internationally recognized continuity of the Latvian
state, the parliament decides to authorize the Cabinet of Ministers to sign the
draft border treaty with Russia initialled on August 7th, 1997.
The proposal was approved with 89 votes to just one. Essentially, the change
means that the Cabinet has the right to decide, which official will be
sanctioned to conclude the agreement with Russia.
Latvian Foreign Minister, Artis Pabriks, mentioned Prime Minister, Aigars
Kalvitis, President Vaira Vike-Freiberga or himself as the potential candidates
for signing the border treaty. "Now, the most important thing is what the
president will do," he added.
The government ministers attending the parliament session included Prime
Minister, Aigars Kalvitis, Transport Minister, Ainars Slesers, Society
Integration Minister, Oskars Kastens, Interior Minister, Ivars Godmanis, Welfare
Minister, Dagnija Stake, and Foreign Minister, Artis Pabriks, who took the floor
twice.
A number of lawmakers voiced concern about the possible development of the
situation in the future, warning that Russia or other political forces might
demand two official languages or citizenship to Latvia's non-citizens.
Pabriks told these speakers not to "mislead people... If there is a
government and ministers like now, two official languages and citizenship to all
will be out of the question."
Several lawmakers criticized the prime minister, accusing Kalvitis of avoiding
to comment on whether the declaration that Latvia wanted to attach to the border
treaty two years ago, will be withdrawn.
After the vote, lawmakers backed a proposal of ten New Era MPs to announce each
lawmaker's choice. The proposal was approved unanimously. Latvian President,
Vaira Vike-Freiberga, now has to decide on signing the bill into law, which is a
certainty.
Government coalition calls for mayor's resignation
The four-party coalition in government on February 7th submitted a petition
- signed by 26 members of the Riga City Council - calling for the resignation of
Riga Mayor, Aivars Aksenoks. The new coalition has nominated Janis Birks,
currently deputy mayor of Riga, as Aksenoks' replacement. In order to initiate a
vote of no-confidence in the mayor, the coalition needed 20 members of the
council to sign the petition.
"People have been coming and signing [the petition] eagerly," Edmunds
Krastins, chairman of the People's Party, said on February 2nd.
The four-party coalition calling for the resignation is composed of Latvia's
First Party, the People's Party, the nationalist alliance of For Fatherland and
Freedom/LNNK - all of whom are members of the current ruling coalition in the
national government - and the opposition Latvian Social Democratic Workers
Party.
Aksenoks is a member of the centre-right New Era party, which is in opposition
in Parliament.
In the words of Baiba Buka, speaking on behalf of current deputy mayor and
member of Latvia's First Party, Almers Ludviks, "The main reason for the
petition was that we asked for the resignation of Riga City Executive Eriks
Skapars. They didn't replace him, so we decided to ask for the resignation of
the mayor [instead]."
Last week the coalition of People's Party, For Fatherland and Freedom/LNNK and
Latvia's First Party asked New Era to nominate a new candidate to replace
Skapars, but the latter refused.
Normally the mayor heads a city's executive functions, but in Riga that job
belongs to Skapars, as city executive. Mayor Aksenoks, by contrast, is chairman
of the City Council.
In rebuttal, New Era accused the coalition of attempting to divert attention
away from the real problems facing the city.
Skapars had been accused of illegally pandering to gambling halls in Riga.
Despite the fact that Saeima (Latvia's parliament) recently passed laws strictly
regulating the number of new gambling halls that could be opened, new ones
"kept appearing around the city," Buka said.
However, Buka noted that Skapars was not the only reason for the petition.
"The problem is that the mayor of Riga has shown a lack of vision and an
inability to work with coalitions in the city," she said. The
representative also contended that poor administration over building a new
concert hall in Riga "demonstrates [the mayor's] lack of management
skills."
The expanded four-party coalition was officially formed on February 6th, with a
document outlining their goals over the next few years. A day earlier, the
coalition met to discuss possible candidates for the mayor's position and
decided on Birks, a member of the right-wing For Fatherland and Freedom. The
nominee stated that he was confident that members of New Era, who are currently
represented by Aksenoks, would back his nomination for the post.
Meanwhile, the New Era party has invited For Fatherland and Freedom to meet and
discuss cooperation. For Fatherland and Freedom, however, has responded that the
invitation comes too late, and that New Era is unlikely to change their
attitude.
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BANKING
Bank of Latvia's assets soar
As another sign of the strengthened Latvian economy, the Bank of Latvia has
announced soaring figures in its balance sheet for 2006. The bank's assets grew
54.7 percent or 914.98 million lats last year, reaching 2.59 billion lats (3.68
billion Euro) at the end of December. In December alone, the bank's assets
increased by 0.2 percent or 5.38 million lats. Vilnis Purvins, head of the
monetary policy section under the Macroeconomic Analysis Department of the Bank
of Latvia, explained that the growth in central bank's foreign assets in
December 2006 meant - up 0.2 percent or 5.11 million lats reaching 2.55 billion
lats - growing value of derived financial instruments in lats. The bank's
foreign liabilities in December 2006 rose by 3.851 million lats or 2.9 percent
to 138.66 million lats, as the European Commission deposits with the Bank of
Latvia in foreign currency increased, but the European Commission deposits with
the Bank of Latvia in lats decreased. The Bank of Latvia domestic assets stood
at 34.87 million lats at the end of December last year, up 0.8 percent or 0.27
million lats from the month before. Domestic liabilities in December 2006
reduced by 43.78 million lats or 3.3 percent to 1.27 billion lats, as deposits
by the government decreased by 227.2 million lats, deposits by credit
institutions with the central bank increased by 180.2 million lats, and deposits
by other financial institutions rose by 2.9 million lats. Mainly due to the
above changes, the amount of lats in circulation increased by 4.9 percent or
50.01 million lats in December last year, reaching 1.27 billion lats on December
31, 2006, the central bank's representative said.
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