All About Latvia

Riga – Unlike the last week’s protest, today’s gathering was pathetically weak and looked more like Geriatric Central with some young nuts thrown in. Around 200 people this morning stood outside the parliament in the Old City.

Pensioners demanded higher pensions, while some young lads and lasses showed their creativity by protesting with buckets on their heads. Someone was calling for free education.

The gathered gang booed the ruling coalition members as they tried to cross the street between their offices and the parliament building. Their whistles and screams also came in full force whenever the Interior Minister Ivars Godmanis turned up. Godmanis smiled in return. The group jeered the Fatherlander Janis Dobelis with shouts, “Traitor.” He apparently took it as a good sign because he gave his thumb up and walked across as a victor rather than a traitor. When controversial Einars Repse showed his face, the crowd’s reaction was mixed: whistles with cheers.

The events featured all characteristics of a old feeble mob.

The parliament is about to adopt the next year’s budget securing the 1 per cent surplus, which the opposition says doesn’t go far enough to cool down the overheating Latvian economy. They demand more spending cuts to the budget. The people who cheered for the opposition demand higher wages from the next year’s budget, not realizing the contradiction.

However, the string of events of the last few days brings up a philosophical question of the rule of democracy.

Is it a democracy when elected officials explain their decisions and bear responsibility for their decisions to the electorate? Or is it when governing elites cast votes based purely on the rule of majority, on public opinion?

Here in Latvia, most people think democracy is the rule of the majority. Majority people didn’t want the gay pride parade taking place in the Latvian capital this summer, yet it took place anyway. Some woman wondered out loud back then why the government let them do it.

Public opinion – while all good and necessary for democracy – is too instable and irrational to base important decisions of the state. It’s a mob rule. The majority wants this one hour and something completely different the next. Mobs are seldom rational and logical in their demands. And it is the minority that often requires the state’s protection.

Bringing it back to the parliament: Should a member of parliament vote what his constituents want him to do or what his conscience tells him would be in the best interests of his district?

Many people, including the opposition party Jaunais Laiks, three years ago opposed Aleksejs Loskutovs for the appointment as the anti-corruption czar. Today, many people and Jaunais Laiks want him to stay.

The ruling People’s Party has greased up its public relations machine to convince the people that the government’s decision to suspend Loskutovs was right. At first, it was the gross negligence in bookkeeping, which turned out to be a smaller problem compared to other ministries. Then, it was the inability of the prime minister to work together with Loskutovs. Both times, the arguments didn’t stick.

The People’s Party has a proven track record that indeed the public opinion can be swayed through a strong public relations campaign, which is how now-embattled Prime Minister Aigars Kalvitis survived last year’s elections.

Addressing the parliament yesterday before the no-confidence vote, Kalvitis said popularity isn’t important to him as his principles. And I couldn’t agree more. However, the problem with his decision to suspend Loskutovs is not its popularity. It’s not about gaining some points in the next public opinion’s survey. It is about circumventing the rule of law. It’s about going beyond the law. And Kalvitis failed to convince not only the people – which is important – but also the prosecutor general’s office that his decision was in accordance with the law.

The Kalvitis government has pushed the envelope, relying on its public relation campaign and apathy from the general public. And soon it may pay the price.

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RIGA – This is the beginning of the end of one of the most durable governments in the modern Latvian history.

Signs of cracks continue to persist.

Last week, unions gathered more than 3,000 of their members before the parliament building to demand their wishes be heard as the parliament was about to debate the next year’s budget.

This morning, in spite of the less than 24 hours notice on a weekday, in the cold, wet weather, more than 5,000 people gathered at the Saeima building, singing songs, holding signs.

They demanded the resignation of this government. They called on the president to dismiss the parliament. They wanted blood of the prime minister Aigars Kalvitis and the transport minister Ainars Slesers.

“Stop stealing,” they shouted. “Stop lying.”

People flooded the street outside the parliament building, spilling into the nearby streets. That’s how much they have grown weary of lies.

The umbrellaed crowd didn’t resemble an angry mob. Quite the opposite. People of different ages wanted to have their voices heard because they have been feeling ignored for so long.

And for the first time in the last few months, I’ve felt that the real power was not inside the parliament building.

It was outside on the street.

Foreigners here observed that to make Latvians come out in such large numbers, you have to really piss them off.

And people are pissed.

When the government played political intrigues in the run-up to presidential elections and people protested outside the parliament and their calls fell on deaf ears, the people patiently took that in.

When the government have ignored signs of overheating economy from the Latvian Central Bank, international credit agencies and local macroeconomic experts, the people patiently took that in.

When the government decided to deal with the Loskutovs factor, attempting to circumvent the law regulating the anti-corruption agency that have been successfully fighting corruption, they’re pissed and they want blood.

Once a guarantor of stability, the four-party ruling coalition have been showing some significant cracks.

The People’s Party — an ironic name for a party that is anything but people’s — leadership are awaiting for Kalvitis to return from his trip to Portugal late tomorrow night.

The Fatherlander candidate for the economic minister had unexpectedly withdrawn his candidacy.

Visvaldis Lacis, a respected member of the Greens, a former Latvian Legioner, said that for the first time he had left pressure from his party leadership to vote a certain way.

In the end though, people need to be heard. As Peteris points out, “Let the people be heard — the only way to slay the cynicism and nihilism that infects every level of Latvian society is to get the political élite to listen.”

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RIGA – About 5,000 people gathered on Thursday morning outside the parliament building to demand the resignation of the Aigars Kalvitis government. Will the government listen?

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This is somewhat bizarre.

When Latvia boasts the second highest inflation in the European Union; when real estate prices are gradually slipping down; when rumors of the currency devaluation have been circulating since this spring and continue to persist; when the country’s current-account deficit is at a critical stage, the Wall Street Journal comes up with this:

Baltics Are Fertile Ground for Private Equity

The Baltic countries of Lithuania, Latvia and Estonia are revving up their economies — and emerging as new hunting grounds for private-equity firms looking to make deals.

All three former Soviet republics joined the European Union in 2004 and have experienced a consumption boom that has driven a surge in economic growth. Estonia and Latvia were the two fastest-growing economies in the EU last year — Estonia’s gross domestic product grew 11.4%, while Latvia’s economy surged 11.9%.

But that strong growth has fueled inflation and driven current-account deficits to record highs. The environment demands caution from private equity and fund managers as they go about choosing their deals.

“The most likely scenario is a soft landing, although we are concerned about Latvia and the risk of psychological contagion in the other markets,” says Marcus Svedberg, chief economist at Nordic fund manager East Capital.

Here’s a bit of a different picture:

Bini Smaghi has it right, the key question for the EU 10 countries is how to maintain the levels of “catch up” growth which would enable them to close the gap in living standards which exists between East and West, and how to do it, so to say, when they don’t have the raw material (in terms of labour supply) to hand to aid them in this.

Thus in many ways the European Central Bank might be thought to be increasingly giving the impression they would not be displeased if the Baltic nations and Bulgaria drop their exchange-rate pegs because they contribute to increasing economic imbalances, according to a research note from Danske Bank (PDF):

“It seems that the ECB is suggesting what would have been unthinkable a year ago: that it is time to change the exchange- rate policies in the CEE countries with exchange-rate pegs,”

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