Latvia at the crossroads
by Arne Bengtsson
Latvia is in a state of serious political crisis.
17 years after independence the country has reached the crossroads. Choices are between a continued Post-Soviet political system and a future-oriented European society.
In October 2007 people got fed up with a corrupt government and took to the rainy streets of Riga in what was coined the Umbrella Revolution. But the only result was a change of Prime Ministers.
The much criticized People´s Party leader Aigars Kalvitis stepped down and was replaced by his 15 years senior, a veteran politician from the years of independence, Ivars Godmanis of Latvia´s Way/Latvia´s First Party. It was not even a new face on an old government. The coalition stayed intact with its oligarch-ruled parties.
Latvia has been a member of EU and Nato for four years, but a dark shadow of its Soviet past still hangs over the nation. The corruption born in Soviet times and fed by privatizations of the 1990s keeps a firm grip over the political and financial elite. To a certain extent Latvia is an “empire” of oligarchs.
Three oligarchs
Aivars Lembergs, Andris Skele and Ainars Slesers are businessmen who became enormously rich during the privatizations and who have tied their fortunes to political power. They finance their respective parties, The Greens, The People´s Party and Latvia´s First Party, and expect political gain in return.
Those parties are not real parties but Potemkin-parties serving as tools for the economic interests of oligarchs, says University of Latvia Political Scientist Daunis Auers who´s PhD dissertation deals with the country´s political system.
The three parties dominate the government coalition, while the oligarchs themselves are suspected of serious fraud. Aivars Lembergs, longtime powerful mayor of Ventspils with its strategic oil terminal, is under investigation for extensive corruption. Prosecutors have charged him with large-scale graft and extortion, money laundering and providing false information in his tax declaration. Having been kept under house arrest for months Lembergs was released in February 2008 awaiting trial.
Andris Skele, founder of the People´s Party and three times Prime Minister in the 1990s, is also suspected of corruption but repeated investigations have not led to charges. The picture is similar for Latvia´s First Party strongman Ainars Slesers, who is the government´s powerful Minister of Transport.
President´s gifts
The oligarch´s government has tried to place loyal tools in the Constitutional Court, at the Ombudsman´s Office and even in the Presidential Palace.
When the independent minded and government critical Vaira Vike-Freiberga stepped down 2007 after two terms as President, the coalition chose a political novice as her successor. Parliament elects the Head of State and since the coalition had a solid majority former surgeon (and director of Riga´s Casualty and Orthopaedic Hospital) Valdis Zatlers became the new President.
Zatlers´ start in office could have been better. Almost all attention was given to the “gratitude gifts”, or as many claim, bribes, he had been given by his patients without declaring them as income.
President Zatlers has since tried to build up his reputation by taking a lead in the fight against the well known corruption in the health service sector, where low paid doctors often have to rely on extra “gifts” from patients.
Anti-anti-corruption
There have been several corruption scandals within the coalition. The latest blow was struck in the autumn of 2007 when the government decided to suspend Aleksejs Loskutovs, the director of Latvia´s anti-corruption bureau KNAB. The pretext was financial misappropriation, which had been revealed in an audit. According to the State Auditor the violations were not serious enough as to warrant suspension of the director.
But the government went ahead and people saw hidden motives: KNAB was about to publish results of an investigation that showed almost one million lat (two million dollars) of illegal campaign spending in the parliament election 2006 by the three oligarch-controlled parties in the government coalition. Inspired by the daily newspaper Diena thousands of people took to the streets of Old Riga demanding the resignation of the government.
Two new parties
When the Umbrella Revolution resulted in no more than a change of Prime Minister, the discontent with the political situation continued to shake the political establishment. Well known politicians have walked out of three different parties and there will be two new ones formed in the spring of 2008. Former Foreign Minister Sandra Kalniete and the Member of European Parliament Girts Valdis Kristovskis will form a new right wing party together, while former Economy Minister Aigars Stokenbergs and Former Foreign Minister Artis Pabriks will set up a party with Social Democratic leanings.
An opinion poll by Latvijas Fakti published in February 2008 showed that the new parties caused a shake up of the political landscape even before they were formally created. Kalnietes and Kristovskis party came in third after the leftist opposition party Harmony Center and The Greens, while the new Prime Minister Ivars Godmanis alliance between Latvia's First Party and Latvia's Way did not make it over the parliament´s five percent barrier.
Economic woes
Once the two new parties are established the government coalition can expect an even stronger competition for voters. The new parties´ anti-corruption messages are likely to find fertile ground in the simmering discontent. Political experts in Riga suggest that the present government will hold until autumn of 2008 at the latest.
That is bad news for a country in urgent need of a strong and stable government to take on deepening economic problems: soaring prices and inflation, plummeting growth and an extremely large current account deficit.
According to a European Commission report in February 2008 inadequate macroeconomic policies have led to the current imbalances, where there is risk for a hard landing from the highest EU-growth of almost 12 percent in 2006 down to just a few percent.
Corruption and political infighting have so far prevented the government from invoking sound and strong economic measures to fight the inflation. With an opposition growing in strength it will be difficult for the coalition parties to rally around economic decisions that are mere recipes for defeat in the upcoming local elections in 2009 and the parliament elections in 2010.
Arne Bengtsson
