Riga, capital of this small Baltic
country was, in the 1930s the forward
listening post of the western powers,
indeed also of Nazi Germany, on
the fridges, as it was of the borders
of the USSR. 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 has not completely
come to terms until its long history
of domination from Moscow.
But newly a member of both the EU
and NATO will, it is hoped, enable
Latvia to focus on the future, rather
than the past.
Update No: 323 -
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 depreciation pressures.
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 himself.
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," he added.
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 framework agreement."
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.
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