Archive for March, 2010

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Another challenge for Dombrovskis


2010
03.22

Posted in The Dombrovskis government | 7 Comments »

Prime Minister Valdis Dombrovskis speaks the media. Photo courtesy of Valsts Kanceleja.

RIGA – Speaking recently at a press conference on the eve of the first anniversary in office, Prime Minister Valdis Dombrovskis said the power “fell at his feet” after the political parties in the previous coalition avoided taking leadership of this country in the middle of the worst economic disaster of the last 20 years. He picked up the baton, doing what needed to be done – however unpopular it was – explaining to the public why his government has had to make tough choices that don’t win elections.

If one is to believe the polls, his tenure as the prime minister so far has been a successful one – people generally have the impression that Dombrovskis, 38, is trying to do the right thing for his country. According to a poll by GFK, 41 percent of the public support Dombrovskis, a high degree of popularity for the prime minister amidst lack of credibility to the government and the most severe economic crisis since Latvia broke free from the Soviet Union in 1991.

Today as four ministers from the leading and bleeding People’s Party submitted their letters of resignation, it created another golden opportunity for Dombrovskis to show his skills for compromise and creativity in search of a political consensus, ahead of the October election. A crisis fosters creativity. For the first time in Latvia’s modern history, political creativity and the government’s ability to negotiate with opposition and seek consensus will be important in the coming six months.

And it began at the end of last week, when Dombrovskis met with the motley crew, known as the Harmony Centre. The Dombrovskis’ coalition is planning a meet with Šleserites from Latvia’s First/Latvia’s Way this week. He’s also meeting with the pro-Russian PCTVL, trying to round up support for the government’s initiatives that would not jeopardize the 7.5 billion euro program. In one sense, the future of this country depends on him.

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VAT through flowers


2010
03.09

Posted in Parliament, Politics, The Dombrovskis government | 15 Comments »

RIGA – A proposal to cut the value-added tax for the tourism industry has been wobbling through the parliament. In spite of the objections by the party of Prime Minister Valdis Dombrovskis and contrary to the recommendations of the International Monetary Fund, the proposal was sent to the parliament for a vote. The opposition party, Latvia’s Way/Latvia’s First (LPP/LC) and the government heavyweight – though largely impotent – People’s Party (TP) laid their hands to move the proposal out of the committee, implying a closer cooperation between the two parties, representing the views of their respective founders.

Speaking to the press after the Monday coalition meeting, a high-ranking TP member Armands Vents Krauklis said that the lenders were not speaking in “a form of an ultimatum,” but that “through flowers” said that lowering VAT “would not be the best solution.” As conspiracy theories suggest, some Latvian officials expect an ultimatum from the international lenders because it is the only way to move forward.

The vote also raises questions about the stability of the government and the coalition’s commitment to the painful IMF-EU funded program, which foresees a combination of budget cuts and tax hikes in the amount of up 900 million lats. While it is a wide known fact that this current government is largely a marriage of convenience, it appears the People’s Party is playing for both teams. On one hand, it is one of the five parties in the coalition. On the other hand, it voted down against the prime minister in a crucial vote for the IMF-EU program to continue. It is no wonder that the Union of Farmers and Greens, aka the Green Peasants, had asked to meet Dombrovskis this afternoon to discuss the issue.

The supporters say that the move to cut the VAT from the current 21 percent to 10 percent for the tourism industry would stimulate the economy which is in the deepest recession since Latvia broke free from the Soviet Union almost 20 years ago. The estimates by the ministry of the economy show that cutting VAT would create 2,000 new work places, a drop in the bucket in the country where every fifth Latvian is officially unemployed. And it remains to be seen if the VAT cut would not affect the budget deficit.

It also raises questions: why tourism? What would prevent other industries, such as farming, dairy, food industries, to line up outside the parliament, demanding that the VAT be lowered for them also? Why not lower VAT for medicine? Education? Freelance journalists? Or why not lower the VAT across the board, assuming the government can raise revenue by taxing luxuries to bridge the yawning budget deficit down to 6 percent in 2011?