COMMENT: EU model member Latvia has still to rout its oligarchs

By bne IntelliNews March 13, 2007

Atis Lejins of the Latvian Institute of International Affairs -

Latvia looks the very model of a new EU member state. Its centre-right coalition government, newly elected in parliamentary elections last October, is wholly pro-European and pro-NATO. And even the left-wing opposition, which draws much of its support from the country's ethnic Russian population, has toned down its anti-EU rhetoric.

Latvia's political system is now so stable that the new government is headed by the same premier as the previous government - Aigars Kalvitis of the People's Party. His victory marks the first time a Latvian government has won re-election since the country regained independence from the Soviet Union in 1991. The coalition government now includes four parties of the centre and centre-right, with a 58-seat majority in the 100-seat Saeima, or parliament.

The government's post-election declaration reads like a carbon copy of EU policy agendas for economic growth and competition, transatlantic relations, the Common Foreign and Security Policy and a joint energy policy. Other sections seemed to parrot the sort of best practice advice that is handed out by the European Commission; the strongest anti-EU comment in the 37-page document was that the incoming government will defend Latvia's national interests within the Union.

The new government also pledged that Latvia would provide troops to the nascent EU Battlegroups, just as it already has done to NATO's Rapid Reaction Force. There was mention, too, of economic cooperation with the developing world and of assistance to European "neighbourhood" nations, especially in the east.

Latvia's intention of nurturing better relations with Russia was also on record, including the thorny issue of the long-running border dispute. Latvia is ready to cede part of its former territory, but getting a border treaty with Russia signed and sealed is easier said than done. Latvia's 1921 Constitution during its brief spell of independence between the two world wars, requires a referendum to be held on border issues. But Russia wants to avoid any reference to the fact that she occupied Latvia in 1940, prior to being ousted by Nazi forces in 1941. Soviet troops returned in 1944 and remained until independence.

Catch-up and clean-up

The new government's policy goals are far from new. They were part of the programmes of all three governments that were formed since the previous parliamentary election in 2002. The name of the political game is simple: catching up with the living standards of the rest of Europe.

Latvia's impressive economic growth is still forging ahead at over 10% a year. The budget deficit is set to fall below 2% of Gross Domestic Product, and at the end of the year there is always a reserve surplus in the Treasury to be handed out to low-paid teachers, doctors and policemen. On the downside, inflation remains the main economic headache at more than 6%. For the moment, though, stemming the flow of Latvians rushing off to Ireland to earn a better living there is a higher priority than meeting the EMU inflation criteria.

But is Latvia's profile as a model European country too good to be true?

Opinion polls still show that the overwhelming majority of Latvians are sceptical about the EU, reflecting more a national psychology that after decades of occupation and exploitation distrusts big powers than any outright hostility to the EU or NATO.

The ongoing problem of corruption is more worrying. Latvia has made some progress against political interference in the legislative and judicial process, which the World Bank sees as much more of a problem than, say, bribery of officials. It is something that is widespread in former communist countries, and successive Latvian governments have shown the political will to fight it. Yet the first act of the new parliament was to dissolve Latvia's anti-corruption commission and merge it with the one that handles defence and home affairs.

However, this move was fiercely challenged by the opposition centre party and on Sunday President Vaira Vike-Freiberga's took the unprecedented decision to block amendments to the Baltic state's national security laws, which he said were designed to "open the door to very serious political manipulation... and, ultimately, influence by the so-called oligarchs, which would be very dangerous."

One amendment allowed unnamed "individuals delegated by the national security council" to launch investigations into security service activities, while the other creates a new National Security Services Council staffed only by government ministers.

The hope is that the state prosecutor's office now has the oligarchs firmly in its sights and will eventually win the day.

Atis Lejins is director of the Latvian Institute of International Affairs in Riga

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