Latvian finance minister Einars Repše (right) hands the government's draft of the national budget to Speaker of the Saeima Gundars Daudze (left) Friday. Despite the smiles of the photo op, the budget drafting process was a drawn-out struggle between the government and Latvia's international lenders. Photo used courtesy of the Saeima Chancellery.
RIGA — Latvian finance minister Einars Repše has handed next year’s draft budget to parliament, which lawmakers are expected to approve.
Approving the budget’s contentious austerity measures is arguably the most crucial phase in Latvia’s arduous road out of recession, one of the worst in Europe. The budget was held up in the government due to wrangling over how to cut expenditures and raise taxes to the tune of 500 million lats (€700 million), the amount that Latvia promised to cut the deficit in an agreement with international lenders in July.
When Prime Minister Valdis Dombrovskis tried to lower the plank to 325 million lats (€458 million) to lessen the blow, Swedish and EU officials insisted that the Baltic state fulfill its promises. Repše called the budget one of the most difficult in the history of Latvia.
“This draft is the result of long and painstaking discussions, and in the conditions of an economic crisis it is the best possible compromise budget,” Repše said in a statement.
The finance minister asserts that the government’s goal while forming the budget was to renew Latvia’s economic competitiveness and protect the economically vulnerable sections of society, neither of which mesh well with the obligatory 500 million lat reduction.
The 2010 basic budget forecasts 2.6 billion lats in revenue, 7.1 percent less than this year and expenditures of 3 billion. The deficit is expected to be approximately 8 percent of gross domestic product, far above the Maastricht criteria for eurozone membership but at the level allowed by the European Commission.
The government reached the 500 million lat consolidation through tax increases (185.9 million), non-tax income (18 million), and expenditure cuts (301.6 million), according to the finance ministry. The question now, of course, is whether the parliament will pass the document.
According to the Latvian constitution, the government collapses if the Saeima is unable to pass the budget. This happened five years ago when the People’s Party unexpectedly balked and dumped then-prime minister Indulis Emsis.
However, there is no indication that the People’s Party, despite thirsting for the prime minister’s chair, would do this again. The national government has only avoided insolvency through emergency loans, and any sudden bout of political instability while the budget has not yet been accepted would trigger a firestorm of international outrage and the lats’ pegged value could fall prey to a loss of confidence and speculation.
“All the main players understand perfectly well that there’s no other alternative, and sooner or later this budget must be passed,” political scientist Ivars Ijabs told the Chas paper in an interview.
But what happens after that is anyone’s guess. Many analysts say that the People’s Party will leave the ruling coalition, either alone or in cohorts with other parties, and try to form a new caretaker government until national elections next October.
“The chances of Dombrovskis heading the Cabinet of Ministers until the next elections have decreased considerably,” said Ijabs. “Most likely the People’s Party will wait for some kind of excesses, disturbances, protests … after all, it’s important to discredit the government before leaving it.”
Already the country’s top politicians have hinted about the prime minister’s job as if it were an open post. Three-time former Prime Minister Andris Šķele returned to active politics last month, declaring his was ready to run the government, and two other top politicians, Riga Deputy Mayor Ainars Šlesers and Ventspils Mayor Aivars Lembergs have said they are ready to become prime minister.
With this much smoke in the air, there is bound to be fire. Once Latvia has a budget in place, the 2010 parliamentary campaign will begin in earnest.
Interesting speculations with names of candidates to next post of prime minister. Don’t we really have another serious candidates outside of these well known oligarches? Feels like “hit me again, I like to be punished”.
But let’s continue speculation little bit. If there are no other choises, need to think about these gentlemen. Skele. He has his time to change politics and country. How about results, well, at least he is one of the richest person in Latvia himself. In right place and right time and oops, I’m rich. What a pity it didn’t help so much the people of Latvia. Lucky Skele, he was in charge when good times. People will remember those good times.
How about Slesers? What did he do as a minister? At least remembered close friends or people around him. Good jobs for them. It’s more or less difficult to imagine Slesers to make honest work for country without thinking own private financial benefits behind all. We have the most expensive roads in Baltics but what is the condition, outch! Better not think about it. Where did that money go? Maybe this ground in Latvia is so much worse or something. Does he like free press? A lot, certainly. How about these latest ideas of municipality-commercial companies in Riga. Of course only wellfare for inhabitants of Riga. Sure. Who will be in charge behind the curtains?
Ok, we can say he has good ideas and he is like a dynamo, neverending energy. Many people likes him because he is doing something. Is it good or bad, who knows but it is something. Better than nothing, maybe.
Or finally time for Lembergs? Maybe same category as these other gentlemen. Found out good and flexible ways to get rich. Little bit like Ventspils’s Robin Hood, but of course he has remembered himsef too.
Sometimes there is feelings in the air about mixing own and public money but …speculations only, maybe.
My private opinion about these three gentlemen turns to Lembergs, if there are no more possibilities to think about.
Why not let him try. He has made his own city a tidy and rich place. Better not to ask how, but results are impressive. Nevertheless he is not worse than these other candidates. Time will tell, let’s see. This was only a speculative thinking, who knows if this current government will be longlasting and guide this little country to new sunrise and smiling tomorrow.