Wednesday, September 30, 2009

Slow takeoff of structural reforms in Latvia

The need to overhaul Latvia´s outdated political, administrative and economic system is long overdue. The EU membership, instead of capitalizing on reforms that could have put Latvian governance system on path of sustainability, led the Latvian political system into the abyss of corruption (head of the Anti Corruption Office announced that it is becoming more subtle) and economic stagnation. The task of PM is titanic and instead of helping to steer the broken governing machine out of the recession coalition partners continue their backstabbing games.

Yesterday, Latvian Cabinet after long wranglings finally agreed (it had to present the same plan already for the May 15, 2009 deadline!) on the universal remuneration system for all the state employees. The new remuneration system stipulates that the highest paid state official henceforth would be the president of the republic, but the governor of the Bank of Latvia (BoL) and the Head of the Financial Capital and Market Commission (FCMC) were left out of the new system due to insistence from the European Central Bank and EU Commission.

While the governor of BoL has agreed to keep solidarity with the rest of the civil servants and to lover his salary, the head of the Latvian FCMC still receives her EUR10 thousand monthly salary. And all this after her odious pronouncements, and absolute inactivity to guard taxpayers interests after crash of the Parex bank, which now undermines already shaky stability of the Latvian Cabinet. The State Audit should publish its official evaluation of the Parex Affair tomorrow, but it already has made Prime minister and prosecutor general their statements made.

While some civil servants in Latvia are busy working on structural reforms other public persons are sinking deeper in their debts. The structural reform process is one hell of a haphazard process in Latvia. Without any discussions now the kids would start attending school at the age of six. Alright, then the government discussed all summer about the plans to emulate a good example of merging Competition Council with the Major Regulator in neighboring Estonia. Latvian Cabinet motley coalition yesterday started their obstructing games, and the whole process of merging those two institutions failed, even though it is long known that the head of the Latvian Regulatory Agency Ms Andrejeva is gambling addict , even though she believes that it is her hobby, and in addition her name is found also in the ill famous list of indebted officials....

The new system of public officials remuneration is a very wise move in a right direction, even though Roberts Zile (MEP) argued that such systems exist only in autocratic countries... .The reform process is too strained and inconsistent due to Latvian constitutional shortcomings (Art. 59). The previously mentioned article makes the PM constantly worry about the stability of the coalition government, because replacement of any minister needs approval in the parliament. Thus, in the Latvian present circumstances where parliament was illegitimately elected and PM cannot devote his full time to structural reforms there is no better and democratic cure than snap elections. This question is on agenda of the president however, because according to Latvian constitution he is the only power who can call for early elections. Involvement of former and present ministers and public officials in openly shady or quasi shady deals tarnish the honest members of the Latvian government. Thus, all in all, the whole Latvian governance system makes me to recall an old Turkish proverb about a person moving one step forward and two steps back...


nelielrīdziniece said...


"The new remuneration system stipulates that the highest paid state official henceforth would be the president of the republic,"

Veiko, it's just a rhetorical question: how many other countries use the salary of a figure-head president as the basis for salaries of civil servants of various competencies, as well as elected & appointed officials?

My knowledge of how compensation is determined (albeit as a discipline generally in a corporation setting) is very minimal. But, you know, the worst part about the 'news' out of LV's MK is that no one seems to realize how large a laughingstock they make themselves.

A year from now, all of us will be thinking of whom we'll be voting for. I remember a close friend 7 years ago in LV saying on the eve of the 8. Saeima elections that the reason to vote was to ensure that we'd all be able to continue to vote - in 4 years, 8 years, etc. In other words, just keep the democratic structure going until someone figures out what on earth to do with the sorry state of LV's politics.

Veiko - what do you think? Have we progressed at all since then?

Visu labu,


Veiko Spolitis said...


Only today noticed your comment, thus the late answer:)

Your rhetorical question is very good and while making a little research I realized that Finnish, Lithuanian presidents are highest renumerated public officials in their countries. Obviusly FIN and LIT presidents are elected in popular elections, and it justifies them being on the highest ledger. Latvian president neither has such powers nor legitimacy, but then its part of discussion about political culture, and here we also have example of British subjects paying bills of their sovereign monarch:) Even though I would argue that PM has more work than president in his/her ofice still the differences in salary are thus negligent, that in principle there is little to discuss about. However, if the discourse about salaries goes the Latvian way (only monetary income concidered without thinking about the symbolism of the office and servinbg the society) then even such differences matter... .

And here we come to the other issue - the provincialism of present oficials in LV, that makes them master laughingstock in EU and the whole world, unfortunately. And the crux of the problem - you know the answer - mediocricy and dried up channels of upward social mobility...:) More precisely - unreformed constitution, election law and ineffective tax laws... . Lets see whether the plans of Valdis Dombrovskis govnt. would succeed:)

And here is an interesting link in case you are interested -

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