Books on Latvia
Update No: 323 - (26/11/07)
Resignation Of Premier Aigars Kalvitis
The news broke on November 7 that the Latvian Prime Minister, Aigars Kalvitis,
will step down on December 5. He has been Prime Minister since December 2004.
Kalvitis announced his decision after a November 7 meeting with President Valdis
Zatlers, who has gone on the record saying that the government should resign
once it has passed a budget for 2008.
The December 5 deadline should give Kalvitis time to push the budget through as
well as ratifying a definitive border treaty with Russia and possibly also
completing reorganisation of local government.
However, it seems that Kalvitis intends that the government itself should
continue even after his departure. According to a report in November 8's Dienas
Bizness, he will appoint new ministers for the Economy, Foreign Affairs and
Welfare before his departure, a signal to Zatlers that a dissolution of
parliament would be untimely.
Not surprising in the circumstances
Mr Kalvitis' resignation is hardly surprising and comes after a period of
intensified political and economic crisis in Latvia. Nonetheless, his
resignation clearly intensifies the crisis further and increases uncertainties
about the political and economic situation in the country.
It seems clear that Mr Kalvitis' resignation has been masterminded by the power
brokers in the three governing coalition parties that undoubtedly will blame him
for the country's mounting economic and political problems. The economic
situation in Latvia has worsened significantly during Mr Kalvitis' stay in
power:- during his period of office inflation has surged, the current account
deficit exploded and the Latvian currency, the lat, has been under strong
Furthermore, one corruption scandal has followed another, so it is unlikely that
he will be greatly missed. However, Danske Bank doesn't expect that the recent
rise in public dissent will die out following the resignation of Mr Kalvitis, as
the same political parties and power brokers will continue to control the
parliament and the government.
Furthermore, Lars Christensen, its chief expert on Latvia, wrote, "The
country's economic crisis continues to escalate, and the risk of a devaluation
of the lat has clearly increased further on the back of Mr Kalvitis' resignation
and the continued surge in inflation. To conclude, Mr Kalvitis' resignation is
no major surprise, but it is worsening the already critical political and
economic situation in Latvia and we continue to recommend investors to hedge
exposure to the Latvian markets."
Kalvitis at first demurred
Kalvitis, back from his trip to the US earlier in November, was reluctant at
first to consider resignation. He instead outlined a three-step priority plan
for his government.
After watching last November 3's anti-government demonstration from the other
side of the Atlantic and hearing about the resignation of Welfare Minister
Dagnija Stake while he was heading Stateside, it could have been a depressed
figure arriving at Riga airport. Instead Kalvitis seemed keen to get back to
business and gave no hint that he might have been considering resignation
Kalvitis immediately identified the finalisation of the state budget, the
conclusion of the Latvian-Russian border treaty and reform of Latvia's regional
administration, as three works in progress that need to be completed before he
could even begin thinking about forming a new cabinet. "There are series of
issues to be solved in the country, which are, to a great extent, the
responsibility of the present government, and not only the state budget. It is
also the issue of the Latvian-Russian border treaty and the final decision on
administrative-territorial reform. I have never avoided this responsibility and
will never avoid it," said Kalvitis.
"The fate of the government will largely depend on the ability of the
government to make decisions and to act, or [its] inability to do so," said
the prime minister. "I do not intend to leave these works unfinished,"
But he proved to be woefully out of touch with public opinion, rather like
British Premier Jim Callaghan returning from a Caribbean summit of world leaders
to a country experiencing a 'winter of discontent' in 1979, leading to the
triumph of Thatcher shortly afterwards. The insouciance of the political
globe-trippers can prove illusory and short-lived.
Asked about hints from President Zatlers that the government should consider
resigning after the adoption of the budget by the parliament, Kalvitis replied:
"I personally have not heard such words from him." He was to do so
soon enough, however.
Kalvitis said that during the planned November. 7 meeting with Zatlers, he would
inform the president about his action plan. This turned out to involve his
stepping down. The resignation of himself and his government were announced on
that very day.
Clearly, President Zatlers made it evident that a change of guard was inevitable
in the circumstances.
Energy to the fore
With winter approaching everyone is thinking about energy supplies in Latvia, as
in the other Baltic states. As it so happens, the EU's Energy Commissioner is a
Latvian, Andris Piebalgs. He is responsible for the concept of the Baltic states
comprising an 'energy island,' although a set of 'energy islands' may soon be
closer to the truth.
The real irony now is that the Baltics' haphazard attempts to avoid being split
by Moscow's divide-and-rule strategy may end up having precisely that effect.
Estonia is disillusioned with the dithering over Lithuania's nuclear plant at
Ignalina and is looking north to Finland. Lithuania and Poland have too much
prestige -- and EU funds -- invested in their joint projects to replace Ignalina,
to let them collapse completely, so they will probably complete them, albeit
behind schedule and over budget.
This all leaves Latvia in the middle, tempted to think primarily of money and to
consolidate its current status as Russia's favourite Baltic state. In his
address at the Vilnius Energy Conference, President Zatlers was much more
conciliatory toward Russia than most speakers, saying: "I will speak about
the case of the three Baltic states as an energy island in the EU. Latvia is
interested in closer co-operation with Russia, as well as dialogue between the
EU and Russia on energy policy. In our view, the principles of the Energy
Charter and G8 Energy Security should be incorporated in the new EU-Russia
EU proposals to develop an over-arching energy policy may offer some hope, but
would require the EU to follow through on a threat to make Russia open up its
own energy market, or to face expulsion from European markets. Such a course of
action would require a degree of European unity that has never been seen before.
But unless Baltic unity can show some signs of life soon, European unity could
be the last means left to link the energy islands.