Books on Latvia
Update No: 288- (01/01/05)
Latvia in the EU
The European Parliament has approved the reshuffled 24-member European Union
executive, ending a political showdown with incoming EU chief Jose Manuel
Barroso over objections to his team. Barroso revamped his executive, dropping
Buttiglione, as well as Latvia's much-criticized in the EU nominee Ingrida Udre,
replacing her with Andris Piebalgs, who was picked to become energy
The Parliament, meeting in Strasbourg, France, voted 449 to 149, with 82
abstentions, giving Barroso a simple majority to take the helm at the EU head
office in Brussels. The incident shows the teething problems of the new enlarged
EU, in which Latvia played a role.
Several European countries have criticized Brussels for failing to offer any
incentives to Ukraine and even called on the European Union to hold out the
prospect of full membership to this large Slav country regardless of who won the
presidential race. The mix of Nordic, Slav and Baltic countries, which included
Sweden, Poland, Lithuania and Latvia, showed how governments in this part of
Europe were becoming increasingly worried over the stability of the region and
frustrated over the lack of any long-term EU policy for Ukraine.
But it also demonstrated how countries whose eastern borders flank Russia,
Ukraine and Belarus have a completely different perspective than those EU member
states that are geographically far removed from the region. Artis Pabriks, the
Latvian foreign minister, said in an interview that the EU had "no common
or foreign policy toward Ukraine." Latvia, under the thumb of the former
Soviet Union until 1990, has become more confident in criticizing the EU and
Russia since joining the NATO military alliance last April and the EU in May.
Pabriks said the countries in the region should speak out and form a group that
could apply pressure on the EU to change course.
Political crisis at home
Latvia is going through one of its periodic crises, in which a new coalition
government is being formed. This time there are unusual features to the crisis.
In an unprecedented move, the nationalist, For Fatherland and Freedom party,
pulled out of government negotiations on Dec. 1, a day after it had agreed to a
large ministerial portfolio and just hours after its close ally, New Era, also
decided to join.
While the party, which has seven seats in Parliament, had repeatedly stated that
it would follow alongside New Era either in the opposition or the next cabinet,
it suddenly changed its stance and decided to go its own way after Aigars
Kalvitis, the prime minister designate, offered the party three ministerial
posts. New Era had just walked out of the bitter negotiations, and Kalvitis
needed to entice For Fatherland and Freedom on board so that his cabinet would
have majority support in Parliament.
However, as soon as For Fatherland and Freedom leaders learned that New Era had
changed its mind and would join the coalition after all, the right-wing party
pulled out of the deal. "The government car will move along on four wheels,
while we would be the fifth wheel," Chairman Janis Straume explained at the
party's congress on Dec. 4. "Our one minister would have fallen victim to
the strong hand of the premier."
Negotiations on the new, four-party government were finalized on Dec. 1, and
Parliament confirmed it by a vote of 75 to 23 the following morning. The
coalition - comprised of Latvia First Party, Greens and Farmers Union, New Era
and the People's Party - will have 70 votes in Parliament.
Yet after a month of tense negotiations that were marred by name-calling, acidic
accusations and even an unexpected cameo by former Prime Minister Andris Skele,
the Cabinet is widely perceived to be vulnerable. Kalvitis, who is a member of
the People's Party, said at the party's congress on Dec. 4 that he could have
left New Era out of the government based on "how they treated us, what
words they used, and what lines they crossed."
New Era, which was created in 2002, earned its reputation by attacking the
allegedly corrupt practices of traditional political forces such as the People's
Party, and the two parties' presence in the same Cabinet has been seen as an
inherent contradiction. Indeed, some observers did not shy away from speculation
that this coalition could prove ephemeral, lasting only until the local
government elections in four months time.
Should such a pessimistic scenario bear itself out, For Fatherland and Freedom
could be in the most beneficial position. The party is already branding itself
as "the only national party in the Saeima" (Latvia's parliament).
"The decision [to pull out of a coalition agreement] was most likely a
calculation of net gains and net losses. They would have had only one post, and
it would have been difficult to position themselves as a nationalistic
force," said Arnis Kaktins, director of the market and public opinion
research centre SKDS.
The Framework Convention on National Minorities, which has recently found
support from the president and the foreign minister, was cited as another reason
the party For Fatherland decided to stay out of the coalition. Party leaders can
now woo voters in the heartland by claiming they did not sacrifice their
nationalist credentials for the sake of an "unnecessary convention."
Nevertheless, For Fatherland and Freedom's seven votes are unlikely to be
missed, and the party has agreed to cooperate with the government on many
issues. Parliament faction head Maris Grinblats told party representatives that
the new government was better than the previous one in that it did not have to
rely on leftist support and Latvia's First Party, a centrist force, would have
Composition of new cabinet
As far as the cabinet itself, a number of personalities have caused
widespread concern. Education Minister Ina Druviete was immediately decried by
minority NGOs - particularly Shtab, the unregistered organization that opposes
the school reform. Immediately after her appointment Druviete said she would
answer questions addressed only in the state language, even if they were posed
by minority school children and their parents.
Other ministers, such as Defence Minister Einars Repse, whose post initially
caused New Era to pull out of coalition talks, said they would not answer
questions in any language. Coming from an individual who preached transparency
and televised all Cabinet meetings, this reversal indicated the degree of
fatigue that has beset Latvian politics at the end of 2004.
Other notable appointees include Ainars Latkovskis, who formerly worked in
Parliament's anticorruption committee. Latkovskis took over for Nils Muiznieks
as special task minister for integration while Janis Reirs of New Era was
appointed to head the new Ministry of Electronic Affairs, a post created to
accommodate the number of seats each party demanded during negotiations.
Krisjanis Karins, who the president had considered as a prime minister
candidate, will head the Economy Ministry.
The previous minority government saw all parties - including the People's Party
- suffer from declining approval ratings, and the People's Party, which is not
at the helm, will try to redeem itself in the eyes of patriotic Latvians.
FOREIGN DIRECT INVESTMENT
FDI and the business climate in Latvia
The news agency LETA has reported that foreign direct investment (FDI) in Latvia
exhibited an abnormal growth of 92.5 per cent and reached US$3.2 billion in the
first nine months of 2004. A majority of the investment came from EU countries -
Sweden, Germany, Denmark and the UK, though other large investors such as Russia
and the US figured prominently as well. Foreigners are interested in
transportation, communications, finance and trade.
Incuklans Timber to sell sawmill
One of the largest sawmill operators in Latvia, Incukalns Timber, is selling its
Gulbene sawmill and focusing on forest exploitation. Swedwood and Merex (now
Rettenmeier Baltic Timber) together purchased Incuklana in 2001. It was
supplying Merex with pine timber. Swedwood formed a new sawmill for itself.
Board Chairman of Incukals Timber, Janis Vuguls, reported that this would
complete reorganisation and specialisation of the company. Vuguls reported that
the decision to sell Gulbene sawmill was taken because it was specialising in
processing hardwood, while owners were interested in softwood, the distance
between Gulbene and Incuklans did not allow successful control of the structural
unit and the long-term felling contract ended in 2004.