Monday, January 19, 2009

In rounds and round we go...

Just yesterday night Latvia´s acting PM Slesers similarly to his buddies in the governing coalition announced in the LNT TV program ``vox populi`` that he wishes to see the snap elections to take place immediately. After meeting the president today the same acting PM announced that immediate snap elections are not on agenda yet... He contradicts thus not only himself, but also the leader of People´s Party (TP) and the present Home Secretary Mr Seglinsh, who sticks to the idea that the Saeima should be sacked as soon as possible. Former PM Andris Berzins (LPP/LC) and the present head of the Saeima foreign affairs committee was against the sacking of the parliament yesterday, this afternoon he announced that his party is ready for immediate sacking of the parliament, and after his party Godfather Slesers and acting PM met the president the former PM Berzins has not changed his discourse yet...thus whom should one trust in this country, when such contradictory statements are flying???

19.01.2009 - Mr President! We (Ministers & MP´s of the governing coalition plus the speaker of the parliament) consider that Saeima has lost its legitimacy, we want to sack ourselves....because we do not want to play anymore!

19.01.2009 - Yes Mr President! After meeting you we realized that we still want to play...

Photo: Aivars Liepins

It is the fact already that governing coalition members are in absolute disarray, and I wonder whether the PM Godmanis would agree to continue in his post after return from Korea. In the meantime president Valdis Zatlers sticks firmly to his initial plan, and I am happy to see the miraculous transformation of his chancellery after arrival of Mr Rinkevics. Mr Zatlers held consultations with all the political representatives today, and opposition parties announced in one voice that they would be ready to work in the national unity government with apolitical PM at the helm (probably the present Head of the Latvian Audit Office Mrs Inguna Sudraba). According to the presidential plan, if his proposals would be initiated then constitutional referendum about sacking of the present parliament could take place on June 6, 2009, or the same day when municipal and European Parliament elections are planned to take the place. Good example of strategic planning from the Pils laukums indeed!

The TP ideologues have realized, however, that their chances are doomed, thus they behave thus boldly that the head of the Saeima Judicial Committee Mrs Muizniece (TP) sent a bill to the parliament proposing to amend the constitution (Art. 10), and that would allow the present parliament to dissolve itself. The president announced today, that he does not support the idea of the TP, and reiterated that he does not back off from the plan to see the ``home work`` done prior the March 31, 2009 deadline, particularly the changes in elections law and creation of the national unity government.


Anonymous said...

Dear mate,

I must say You as well as most of Latvians these days- are looking wrong way. Dissatisfaction with current government and Saeima is natural when economical issues arise. You have seen it before every crises in every state- it has been so since ages. But PAY ATTENTION!

The core of the crises lays in economical situation of Latvia. And as political crises has came to the front plan of daily agenda- many have forgotten that Latvia faces serious unsolved economic issues.

Most people are discussing these days how would be the loan from IMF and EC spent.. Put dear friends, first things first- problem of national currency is still unsolved. It seems that Latvian government by not depreciating the lats has chosen to push Latvia's economy in even deeper dead end.

Let me explain why:
1.In order to save- (1) local mortgage holders (those in Euros) from increasing amount of mortgage due to increasing price of Euros and (2) Scandinavian banks from loosing their credits (those in LVL) it is an obvious step to hold lats in its current position.
2. Nevertheless, lat's exchange rate has a major influence on export and industry. Perhaps issue of lats is even more serious in context of export and industry. Basic economic laws will explain to kids that- once a currency is pricey the exports would not grow. But at this moment it seems that government has decided to support export by taking loans in Euros thus even worsening the situation because the price of Euro would grow as more loans are granted in Euros. At the same time currencies that are pegged to Euro stay strong (in Latvia's case owing to huge spending of central bank). The pity is that such plan would not only stop exports (those that are remaining), it would generally abandon the industry because due to shrinking exports the businesses are closing down.

Therefore it is worth opening eyes and focusing on real issues. But instead of that we get silly confrontation among the president and government and parliament.

E. Cronnen

Baltic said...

Dear E. Cronnen:

I wish I could agree with you:) Whilst I agree with you about the economy being paramount problem now, I do not agree that the Latvian opposition watches in wrong direction. First, economy does not exist in void, and the artificial belief in omnipotence of markets in regulating economy that some traditional economic liberāls propogated since the early 1990´s has proven its drawbacks. Second, when countries must compete as a whole in the global pecking order for scarse resources, then the quality of governance becomes extremely important.

Actually the Kalvitis government had to be sacked already in 2007, after the odiose security laws and, and opposition had to capitalize on stolen elections (Supreme court decision aso f November 3, 2006), but during times of real iestate bubble NOONE AMONG THE POLITICAL ELITE LISTENED.

I could agree with you about the textbook case of devaluing the lati n order to alleviate Latvian businesses, BUT... Latvia is being deindustrialized throughout last 18 years, and there is nothing of the export industries left, actually. Thus, the same PM and his economic advisor (Mr Miglavs from the Institute of Agricultural Economics) argue, that because we do not export anything tangible (!), thus we better stick to the stable lat policy and try to reach the Maastricht criteria by 2012. REMEMBER that it is the policy of the government that is also approved by the BoL governor. In order to receive the EUR 7.5billion government had to perform structural reforms and cut salaries by 25%...and here is the questuion of technique, that seems silly. Also, devaluation would be sensible if Scandinavian and other banks would allow the euro mortgage lokans to be transformed into lat loans, because 5/6 of the mortgages are taken in euros. If devaluation would take place without such transformation the not only middle class would be killed, but it would kill the republic...

Opposition has ACTUALLY proposed real stimuli for economy (changes in fiscal policies, transparent export subsidies mechanism creation, not cutting education financing but investing in vocational and R&D spheres etc. Etc.)– but the present government is either unable or unwilling to listen – THUS THE DEMAND TO CHANGE THE CAPTAIN AT THE HELM and the crew that has not learned the basics of navigation in the global seas!

Anonymous said...

Well, I see.. So almost no industry left. And those still straggling are facing decreasing amount of export thus even those that are still left - will train out.
So what is left:
*a country with no industry
*a country with no exports
*unclear political leadership
*a nation that is ether poor or under pressure of consumer credits and mortgages
*recently received loans from IMF and EC

Concerning the country: if loans from IMF and EC are spent wisely there must be structural changes. so the industry will evolve and exports as well (how if not by depreciating lats, because recently even Lithuanian Snaige has decreased its production amounts and they partly blame high exchange rate of litas).
Concerning business: businesses are facing several problems: 1. shrinking exports 2.decreasing purchasing ability in local market. so while lats is pegged in euro even those that are currently exporting will lose money with every exported party or will shut down. so people will be sacked. Both businesses and sacked people will fail to return their credits. There for their property will most likely go to banks (mainly Scandinavian) and these can not be helped because it was said that money from IMF and EC would not be given to refinance existing credits. Besides lost property to Scandinavian banks there is another thing- not everyone will go bankrupt. case of constructing goods providers as Naglex and Tapex, Profs showed that there will be no amnesty from Scandinavian banks thus helping to remain in business only big Scandinavian companies like Stoker and K Rauta.
Concerning people: jobs lost,wages cut, failed to pay back all types of credits, property lost. not to mention almost bankrupt KKF (culture foundation) and cut spending on science and education (now how does this meets a plan of structural changes?).
Concerning politics:
well, I assume that we both are aware of situation.

So overall: changes are to come in politics and economics, BUT mean while people are loosing everything and business are shutting down. So I must say- it seems that Latvia has decided to take economic pain in order to safeguard Scandinavian banks and businesses. (Solidarity of the EU, isn t it? lol)

Actually I m worried that people will decide on leaving this country. So combined with decreasing population (ok- increased numbers of birth last year for the very first time) this will mean no social base for structural changes..

Anonymous said...

.. sorry. Previous post was by me- E. Cronnen.

Baltic said...

Dear E. Cronnen,

I fully agree on your comment, except the devaluation part. In textbook case, AYE, there would be NO OTHER option than to devalue. However, Latvia is the member of the EU and convergence criteria applies to this country.

Saving SWE banks and receiving pain on Latvian public sector is one side of the coin. Other side are security concerns and murky business with Parex... Who the hell knows what was promised to government for this information that was didtributed to the Washington DC and European capitals, after Parex collapse and disclosures???