Tuesday, September 25, 2007

Coming of an end

I am bck in Riga and busy lecturing. In the meantime there is serious infighting among members of Latvian political elite. The economy is over-heated and among the leaders of Latvian executive I do not see comprehensive plan to manage balanced development of the society. EU Commissioner of Regional Politics Danuta Hybner is visiting Latvia where she signed the memorandum on funds to be received in Latvia from the EU regional funds for 2008-2013. The commissioner had a nice visit to the Latvian version of Potyomkin village - the Laima candy factory. Latvian state is one of the worst in using the EU funds due to the bureaucratic obstacles and coruption it fosters. The fact that the ever-burgeoning class of administrators was partially reigned in by the latest decision of the government to have salary caps for the next fiscal year ir laudable. Such decision is only smoke creen however, because in the situation with hemorreagging human resources the top administrators are simply hyper rich. Today's Dienas Bizness has devoted most of its editorial page to the wages and rich perks Latvian top civil servants receive. According to the information there are such strange phenomena, that the head of the PM's bureau as well as the head of the president's bureau chief receive bigger salaries than their bosses (is it coincidence that both gentelmen were members of Communist Youth Organization?). There is a nice brake down of all the top-notch administrators and their perks, thus, those of you willing to have a comparison with dministrators in your own countres I suggest you visit the folowing website (http://www.db.lv/Default2.aspx?ArticleID=f5a2efa8-c2ec-480c-8cc6-bc98d4aaa793).

Yesterday, the government had negotiations with the Teacher's trade union while more that two hundred teachers from all over Latvia had their demonstration in front of the Council of Ministers. The latest news from the Council is that teachers cannot expect payrise. Doctors are in similar situation and the 25% rise in electricity and gas from October 2007 would not make life of teachers, doctors, policemen and firefighters easier. In the meantime the PM has woken up and temporarily suspended the head of the anti-coruption agency (KNAB), Mr Aleksejs Loskutovs. This delayed affair (PM was informed about minor problems in using publi funds already in May 2007) and sudden suspesion of Mr Loskutovs employment, that surprised even the Head of the State Audit Bureau, Ms Ingūna Sudraba, looks absolutely ludicrous. The fact is that KNAB was planning to publish their first results about investigation of illegal election campaign financing, illegal payments of incumbent prsident Valdis Zatlers, and deals of the prime minister Andris Šķēle. It is long known that former prime minister was supporting his People's Party with 300 000Ls, he supported incumbent president and also he is also accused in the Latvia vs. Kempmayer Ltd. court case.

Goverment is busy preparing the 2008 budget and apparently the surplus is planned only around 0,5% (experts advised to have it around 2%). The growth of economy (11,3%) in combination with the real growth of wages (32%), inflation (10,2%), current account deficit (23,5% in the second quarter of 2007) and outpuring workforce are still alarming. The real estate bubble has caused also tremendous increase of the rate of Latvia's external borrowing. To look into the Bank of Latvia webpage (http://www.bank.lv/lat/main/research/statistika/maks-bil-stat/2007/cet_mb/index.php?91995) one may notice that Latvia's external debt has increased from 6 939 445 000Ls to 15 582 377 000Ls from April 2004 to February 2007!

Rumours of the fall of the existing government are getting louder. The fact is that the existing PM is spineless and absolutely not up to his task. Global economy requires small, smart and mobile executive, but in Latvia we have large, bloated gang of mediocre folks. People's Party is trying to come out as a winner out of this situation, but the ills of serving special interests are too heavy and I am afraid that simply remodelling the government would not be enough. Not only government, but also the existing parliament should go and give a fresh start today, while the economic crisis is just behind the corner.

Tenets of liberal or conservative right wing policy have ben tainted all thse years in Latvia. All this dilution of the ideological purity was performed due to the wish of governing elite to save their parliamentary seats. The coming crisis might finally bring some purity in ideological actions of parties and thus reform the ever-burgeoning class of state administrators. Now the question is, when exactly the coming of an end would start to unravel?

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