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LATVIA


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 9,671 8,406 7,500 94
         
GNI per capita
 US $ 4,070 3,480 3,230 79
Ranking is given out of 208 nations - (data from the World Bank)

Books on Latvia




Update No: 316 - (26/04/07)

Latvia is coming of age as a Western nation. In November last year it hosted a NATO summit, the first former communist country to do so, an incredible honour.

People enjoyed the experience of going to a country hitherto virtually out of bounds. The ice was broken; the Cold War was over. Or was it? Recent events leave doubt about that question.

European presidents meet in Riga
The presidents of eight EU countries gathered in Riga on April 10th and 11th to hold “informal meetings.” The leaders agreed on a number of topics but did not announce any sort of formal declaration. 

The leaders pointed out that such informal meetings are very useful, as they provide a chance to debate various European issues more freely and creatively. Aiva Rozenberga, spokeswoman for President Vaira Vike-Freiberga, said that “the aim of the conference is to exchange views on European integration, the role of EU in the global arena, etc. Sometimes informal gatherings can in the long term play a more important role than official settings.”

One of the topics discussed at the meeting was the EU constitutional treaty. When asked about her thoughts on the treaty at a news conference after the April 11 talks, Vike-Freiberga said it was necessary for the member states to agree on a new treaty. “The issue must be resolved so that the EU as a whole could function more efficiently,” the president said. 

The EU leaders also discussed the formation of a common immigration policy in Europe, an issue that has plagued EU leaders for some time. They agreed that it is necessary to find a solution to the problem by developing a common immigration policy for the whole EU that will facilitate an even distribution of immigrants across all regions. “Borders cannot be opened without setting an acceptable limit... If the number of immigrants in a country exceeds 8-10 percent of the total population, it becomes a problem... It is necessary to provide asylum, but rules are necessary, too,” Hungarian President Laszlo Solyom said.

Other topics discussed included the bloc's global competitiveness, balanced teaching of the organization's history in schools, the future of EU integration, and environmental issues. 

The participants of the informal talks included Vike-Freiberga, Finnish President Tarja Halonen, German President Horst Kohler, Italian President Giorgio Napolitano, Austrian President Heinz Fisher, Portuguese President Anibal Cavaco Silva, Polish President Lech Kaczynski and Hungarian President Laszlo Solyom, as well as the spouses of the European leaders.

Portuguese leader Jorge Sampaio organized the first such informal meeting four years ago. The tradition was continued with similar meetings in Helsinki in 2005 and in the German city of Dresden in 2006. The next informal meeting is scheduled to take place in Austria. 
Latvia draws closer to security referendum
More than 60,000 signatures have been collected in the first two weeks of a signature collection campaign that is being held in Latvia to initiate a referendum on two controversial security bills that President Vaira Vike-Freiberga refused to sign into law. The month-long signature gathering campaign began April 3 and will last until May 2. The results will be announced on May 10. 

During the four weeks the Central Election Commission will have to gather the signatures of 10 percent of Latvia’s voting population, or 149,064 signatures, for each of the two bills in order to send the amendments to a popular referendum. 

Voters are able to sign for the amendments separately. 

The amendments, which were supported by the government and Parliament, would drastically change parliamentary oversight of Latvia's law enforcement agencies. In the president's opinion, they would harm the delicate balance of forces in the country and jeopardize the country's standing with security allies. 

The passing of the amendments sparked enormous controversy and nearly plunged Latvia into a political crisis. The government initially pushed the amendments through using a special law which allows them to pass bills while Saeima (parliament) is in recess, a move which the president blasted as brazen and unnecessary. 

The president vetoed the bill, sending it to parliament for revision. When parliament sent it back to her desk unchanged on March 10, the president still refused to promulgate the amendments, exercising her right under article 72 of the constitution. It was the first time in Latvian history that such a measure was put into motion.

Government leaders, meanwhile, argue that the bills work to improve coordination among government institutions with regards to security, and that the amendments would be considered a normal set of laws in most other countries. 

Latvia no longer dependent on World Bank
The Latvian economy is booming. It no longer needs outside finance.

Latvia’s strengthening status on the world stage was confirmed on April 13 when the World Bank annulled its status as a borrower with the International Bank of Reconstruction and Development. The move means Latvia is no longer dependent on the World Bank for financial assistance. The Baltic country will soon move toward becoming a donor to the institution to provide aid to other developing nations.

Latvia’s Finance Minister Oskars Spurdzins signed the annulment document at the annual trustees’ meeting of the International Monetary Fund and the World Bank in Washington. “This fact marks a new phase in the cooperation between Latvia and the World Bank, whereby accepting the challenge, our country starts moving towards the donor state status," Spurdzins said after the signing.

Latvia joined the IBRD as a borrower in 1992, and accessed funds to help finance more than 15 projects. It has not taken a loan from the bank since 2002, but has continued to access technical advice.

Both Lithuania and Estonia voided their borrower status with the bank in 2006.

But overheating is a problem
Yet it is not all good news. Standard & Poor's single out Latvia as having a particular problem with overheating.

"The continued trend of upgrades outnumbering downgrades since 2000 for (emerging European) sovereign countries reflects the sustained improvements in their economies," said Ana Mates, Standard & Poor's credit analyst and one of the authors of a new report released on April 18th. 

"For some of these sovereigns, however, the prospect of increased investment flows and buoyant domestic demand brings with it the possibility of economic overheating," Mates said. 

Five countries are at most risk: the Baltic states Estonia, Latvia and Lithuania, as well as the European Union's newest members Bulgaria and Romania. All five countries are ranked investment grade. Latvia and Romania, however, will likely experience the hardest landing, Standard & Poor's said. 

In February, the agency revised its outlook on Latvia to negative from stable, citing clear signs of overheating and the increasing risk of a hard landing for the economy. There has been speculation since then that Latvia may have to devalue its currency, the lat, which is approaching the low end of its narrow fluctuation band. 

Latvia's predicament exemplifies a common problem in emerging Europe, where membership in the European Union has boosted domestic demand close to unsustainable levels. The five "overheaters" have to rein in large current account deficits and credit booms. The need to finance large external imbalances makes the balance of payments vulnerable to fluctuations in investor confidence and international liquidity conditions. 

Lars Christensen, senior analyst at Denmark's Danske Bank, agrees that there is a clear regional trend of overheating. 

"Domestic demand has accelerated all across Central and Eastern Europe and the overheating 'zone' is not far off in many of the new EU countries," Christensen said in a recent note. 

"The situation is worst in the Baltic States, where recent inflation numbers have surprised strongly on the upside and in southeastern Europe, where the current account situation has deteriorated further in recent months." 

Because economic growth is becoming less sustainable in emerging Europe, there is a higher risk of increased volatility in regional stock markets, Christensen said.

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