Anti-euro crusader gets stiffed, now what?

And so it has come to naught. That is how Saeima deputy Iveta Grigule’s efforts to stop the euro implementation law ended, at least as far as using the right of 34 Saeima deputies to petition President Andris Bērziņš to refuse to sign the law into force and put it to a referendum. The short of it is, she was stiffed last Monday by the Harmony Center (SC), the party that seemed to have pledged 31 signatures. SC leader Jānis Urbanovičs said it would be “irresponsible” to block a law that had been passed by a majority of the Saeima. Not even renegade National Alliance (N) parliamentarian Jānis Dombrava was ready to put pen to paper to block a law he had voted against in breach of coalition discipline.

Grigule, despite being left high and dry and looking more than somewhat foolish, soldiers on, sending a letter to the president with a handful of signatures (I heard three) anyway and promising to make every effort to get 30 000 voter signatures for a referendum initiative.

As I pointed out earlier, the ZZS parliamentarian’s appeal and that made by many other euro opponents is largely emotional. There is some merit, however, to the emotionally appealing slogan that “the people should decide”. Democracy is a good thing, especially if it looks like a democratic decision made nearly ten years ago (and implicitly) in voting to join the EU may have been hasty on the aspect of joining the eurozone. National electorates should have the right to revise earlier decisions, especially if they see things going in the wrong direction. This is what the British  government under David Cameron is suggesting.

So far fine and good, but if there is going to be a referendum on the euro (unlikely as that  may be), there should be a solid plan for the “no” side. The “yes” side has it all planned out in the contested law, down to every detail. Unless the euro opponents – so far a motley crew of cranks, crackpots and a few sincere and respectable critics, such as the economist/entrepreneur Jānis Ošlejs – come up with a detailed plan for how the lat will be managed after breaking away from its Exchange Rate Mechanism II (ERM II) corridor with the euro, they will be no viable “no” alternative. To leave things as they are means to keep the lat as “virtual” euro, which is one of the pro-euro arguments – why not get the real thing?

What worries me about the eurozone is that its troubles may not be over. The Greeks have not fallen over the side, but they would not be missed, even if there was a knock-on effect on other economies, followed by a rush from northern Europe  to sip ouzo, drink retsina and vacation on the Greek islands for new drachma that cost a pittance in post-Grexit euro. The serious shit, to use a term I am sure many economists use over a beer, will start to happen when Spain and perhaps even France (the Economist, hardly a crackpot rag has mentioned this) start hitting serious turbulence. That is when a lot of countries will need a well-thought out plan B, perhaps regrouping around a D-mark 2.0, probably called the Nordeuro or something like that.

Unlike the Scandinavian countries that stayed out of the Eurozone, Latvia does not have a strong economy and  a prosperous society, therefore the lat will have to be linked to some other currency or currencies, in, at best, some kind of managed float. Those responsible for the “independent” monetary policy that euro opponents say they are defending will have to design and manage it. So far, it doesn’t look like anyone in Latvia has done so.

P.S. Sorry for writing this so after the fact. My day job and some translation work has kept me busy.  

Will weird deeds follow fighting words on the euro?

This coming week will get interesting as the anti-euro “Dragon Lady” and Saeima deputy Iveta Grigule asks those who pledged their support in an effort to block last week’s euro implementation law from coming into force to put ink to paper. At least 34 signatures are needed on a letter to President Andris Bērziņš asking him not to sign into force the law that was passed on January 31 and to initiate a process leading to what would amount to a referendum on the euro itself. After all, without a law specifying how the switch from the lat to the euro would be made around the turn of the year to 2014, it will be impossible to start using the euro as planned.

Over the weekend, the debate over whether to adopt the euro went into high, perhaps too high gear as Sarmīte Ēlerte, a former newspaper editor and Minister of Culture, presently a candidate for mayor of Riga on the Unity Party (V) ballot, said that Grigule’s initiative was just as harmful to Latvia’s interests as the failed referendum last spring to make Russian a second state language. It was also a statement that, in effect, lumped Grigule of the centrist Green/Farmers’ Union (ZZS) with the leftist-populist and allegedly pro-Russian Harmony Center (SC).

In response, Grigule said that Ēlerte was acting like a Soviet-era demagogue and sliding into a desperate “the euro at any cost” campaign. She claimed that countries such as Sweden and Denmark, both members of the European Union (EU), were economically doing well if not better than the Eurozone countries and that Poland and the Czech Republic were not rushing to adopt the multinational currency.

On her part, Ēlerte said that “the populists and the “reds” are trying to split society in order to stop Latvia’s development, gain votes in the municipal elections and stay in power in Latvia’s cities.”

Not to be outdone, Grigule fired back with a nationalist salvo: “ By making us abandon our own currency, the government is forcing us closer to a United States of Europe. In the renewed Latvia, a whole generation has grown up together with the lat. The grew up listening to their grandparents stories of the (interwar) free republic and the battles, about the silver five-lat coin handed down from generation to generation as a sacred talisman, a precious memory of those distant and dramatic times. When we think of the symbols of Latvian statehood, we think of the flag, the national anthem, the Latvian language, and also our own lat.”

Somehow the rapid shift from reasoned argument to hyperbolic accusations and pathos doesn’t surprise me but makes one wonder why both politicians are risking taking this tack. Grigule, should she fail to get her 34 signatures, would lose her quickly gained celebrity, something which the SC might think about before having all 31 of their parliamentarians running pen in hand to a potential political rival. If anything, Grigule’s nationalist appeal is aimed more at getting one, two, maybe more “Jānis Dombravas”  to bolt from the National Alliance (NA) (as Dombrava did by breaking with the coalition and voting against the euro implementation law, which passed anyway by 52 – 40). In any case, I suspect that a lot of SC voters, good citizens of Latvia, have more likely handed down some Czarist gold ruble coins in the family, not the silver “Milda”  coin from the 1930s.

While the 2014 Saeima elections are still far off, Grigule’s waving of the lat banknote-as-flag is a signal where the ZZS will seek their first political allies, hoping to be treated as politically respectable again after being pushed out of government because of their alleged close ties to the notorious oligarch and deposed Ventspils mayor Aivars Lembergs. ZZS was an uncomfortable partner for Prime Minister Valdis Dombrovskis (V) government but was pushed aside in the present coalition by the “anti-oligarch”  Reform Party. However, the Reform Party is effectively dead, garnering less than 5 % voter support in recent polls. Not the least, the once popular party founded by former President Valdis Zatlers, just after he dismissed the previous Saiema and was not re-elected, dug its own grave by a desperate effort to bring SC into the government at all costs. Zatlers (whose name was in the official party name until some time ago) even said that it would take “tanks” to break his determination to bring the populist and “pro-Russians” into government.

With Grigule talking like a “fellow traveler” of the NA, there could be some tactical advantage to SC double-crossing Grigule and making sure that she gets, say, just 33 signers (if you want more, pry some loose from the NA whose door you have been barking at). To be fair, the SC at least has unsucessfully resisted the euro implementation law by proposing to amend it with impossible conditionalities – LVL 300 minimum wage, LVL 600 median wage, unemployment under 5% -- fantasies, at best, from the mid-2020s.

It’s Sunday evening as I write, but it will be Monday soon and the fun can begin again.

The Green Dragon Lady claims a posse or a platoon

So now the monkey wrench flies toward the gears of Latvia’s movement toward the Eurozone. Whether it hits and stops the wheels, we will see next week. However, it is hard to believe that Saeima deputy Iveta Grigule (Green/Farmers’ Union – ZZS) would go out on a risky limb and groundlessly claim that she has the 34 Saeima deputy signatures pledged that are needed to ask the president either to refuse to sign the law on adoption of the euro or submit it for a referendum, first gathering the signatures of at least 10% of the electorate.

The start of that process alone, even if it ultimately fails (insufficient signatures or the euro law is approved), is a major threat to the process of euro adoption, as has been pointed out earlier. In addition, there is yet another threat – that the whole attempt to block the law can trigger a kind of constitutional crisis in Latvia. Grigule has said that if President Andris Bērziņš refuses to act on the request by at least 34 deputies, she will take her case to Latvia’s Constitutional Court. Bērziņš could refuse, citing Article 68 of the Latvian Constitution, which requires at least 50 parliamentarians’ signatures if the disputed legislative act affects Latvia’s foreign relations and treaty obligations. In this case, it could be argued that rejecting the law on euro adoption is the same as backing out of the commitment made to eventually adopt the euro when Latvia joined the European Union (EU) in 2004.

Pro-euro politicians, including Latvian Prime Minister Valdis Dombrovskis, have argued that by passing laws regulating the practical and technical side of the switch from lats to euro, Latvia is simply fulfilling a commitment it implicitly made when the electorate voted in favor of joining the EU in 2003. The euro itself was not on the ballot, it was a yes or no to the EU, but the treaty Latvia signed committed it to adopting the euro when it met the Maastricht criteria, which it now seems to be doing after failing to do so in 2008 and 2011.

It is interesting how the issue would be framed before the Constitutional Court (and I am no expert on Latvian constitutional law). It seems that the Court would have to rule, explicitly or implicitly, on whether there was a Latvian treaty commitment to adopt the euro, which could be changed by a referendum rejecting the implementation law. The president’s rejection of a petition by less than 50 Saeima deputies would also mean that Bērziņš at least implicitly supports this interpretation. After all, if no international treaty commitment by Latvia would be affected by a potential referendum, then there was no commitment in force. The same if the court rules against Bērziņš. In effect, the issue of whether Latvia already “voted” to adopt the euro when it joined the EU and would be substantially modifying this commitment by stopping the implementation law,  or whether there was no such commitment, will end up decided by the Constitutional Court.

So far, so good for Iveta Grigule, who has become the opposition’s Dragon Lady to the coalition government and has probably lured Jānis Dombrava of the National Alliance to her lair. But what happens next, when Latvia is cast into the murky ozone as far as its relationship with the euro in general? After all, if there are no immediate or even medium-term plans to adopt the euro, then the lat could come under various kinds of pressure. If uncertainty jacks up interest rates and yields on the relatively few Latvian interest-bearing instruments available to foreign investors (or investors in general) rise, the lat could surge. Or it could plunge on uncertainty, fear and paranoia. How many millions is the Bank of Latvia ready to spend to stabilize the currency, and by what targets or standards? To keep it in a narrow ERM II corridor when being in the ERM II regime is in question?

No one seems to have a “we just postponed the euro indefinitely” scenario for a managed float of the lat – pegged to what?  Or not pegged, dancing around, to translate a (off)colorful Latvian expression – like a fart in a frying pan (kā pirdiens uz pannas)? All of these issues may come into focus next week, if the Dragon Lady gets her way. Question is – will the dragon be able to blow out any dangerous fires it sets? 

FYI: A platoon is a military unit typically composed of two to four sections or squads and containing 26 to 50 soldiers. The Dragon Lady claims she has her platoon,

Dear Latvian readers: the Green Dragon here has nothing to do with the national sport of alcoholism (zaļais pūķis). No such reference to Deputy Grigule is intended. 

The euro implementation vote is only the start

Latvia’s parliament, the Saeima, passed a law setting out the technical procedures for switching from its national currency the lat to the euro on January 1, 2014, assuming that it succeeds in getting the green light for admission to the Eurozone from the European Commission and the European Central Bank. 

The vote was a bare majority of 52 to 40, with one parliamentarian from the National Alliance, part of the governing coalition, Jānis Dombrava, voting against in what was permitted as a “vote based on conscience”. Just late last year, the National Alliance shook the coalition by suggesting it could oppose the euro (backing off from its early official position in favor of joining the eurozone). 

However, there could still be obstacles to a smooth entry. There is a less than trivial possibility that opposition Harmony Center will get three more parliamentarians (in addition to their own 31) to get the necessary 34 votes to request President Andris Bērziņš to initiate a referendum on whether Latvia should adopt the euro.

Saeima deputy Iveta Grigule of the opposition Green/Farmers’ Alliance (ZZS) said she would urge the other 12 members of her party in the Saeima to sign. ZZS faction leader Augusts Brigmanis had earlier said no one from the ZZS would sign.

Once the referendum ball gets rolling, Latvia would, like an airline unsure of its estimated time of arrival, lose the January 1, 2014 “slot” for joining the Eurozone. While Latvia has missed opportunities before in 2008 and 2011, when it did not fully meet the Maastricht criteria, it could also lose the current “window” of Maastricht compliant economic indicators. As Morten Hansen, an economist who teaches at the Stockholm School of Economics recently pointed out; Latvia’s export-driven economic growth could soon boost inflation above Maastricht limits. Assuming the country maintains steady, non-credit fueled high growth and moderate wage and price rises, this could have the paradoxical effect of shutting the Maastricht window on an otherwise sound economy.

This is what is at stake – indefinite postponement of euro adoption while still keeping the lat as a “virtual euro” pegged at 0.702 santims per euro unless someone comes up with a better idea. Indeed, if the idea of the parliamentary opposition is to back away from the Eurozone indefinitely, it might be wise to consider an alternative managed float for the lat, but this is not being discussed. Mostly, the debate has been framed in terms of avoiding various economic “cataclysms” such as a post-adoption jump in consumer prices, poor competitiveness that can no longer be counteracted by monetary policy (not that it could before, with no room for devaluation under the present very tight corridor) and demands to “pay the bills” of other wealthier, but economically more troubled Eurozone countries (the example is made that unemployed Greeks collect far more in benefits than a Latvian can earn working at a normal job).

A strong undercurrent of the anti-euro arguments is nationalism – the lat, launched in the 1920s from a menagerie of interim currencies and World War I occupation scrip – was replaced by the Soviet ruble in 1940 and reappeared again in 1993. Between the time Latvia regained its independence in 1991 and the re-launch of the lat, Latvian rubles were used and given the nickname of “repshies” after the then Governor of the Bank of Latvia Einārs Repše. For many Latvians the currency is a symbol of national sovereignty, like the red-white-red flag, also repressed under the Soviet occupation and carried out into the light again by some daring individuals during the perestroika period of the late 1980s. Latvians still recall the emotional raising of the red-white-red standard over what is now the Presidential Palace in 1988, on November 11, a pre-war day of remembrance for those who died in Latvia’s war for independence from 1918-1920.

If the opposition parliamentarians fail to get the referendum ball rolling, they can try to collect 30 000 signatures to initiate a referendum from below. Here they may get some sinister allies – among them, the “Antiglobalists” demanding Latvia re-instate the death penalty for “economic crimes” and, by the way, calling most of what has happened over the past 20 years a string of such crimes.

Point two of the Antiglobalists 2010 program calls for “starting a Nuremburg trial against those persons, by whose action or inaction over the past 20 years, the economic destruction and looting of Latvia took place and for political decisions, that harmed the Latvian state and nation.”

In other parts of the manifesto, the Antiglobalists call for a protectionist, autarkic and state-controlled economic system that, of necessity, implies Latvia’s exit from the European Union (EU) and, probably, from several international trade treaties.

Another bizarre addition to the extraparliamentary opposition to the euro is the “Gustavs Celmiņš Center”, which is a revived inter-war Latvian fascist movement under the name of its founder and leader Gustavs Celmiņš, who despite his sympathies for the Italian and German dictatorships of the 1930s, ended up in a German concentration camp. Celmiņš was liberated by US troops from another camp in Austria where he was held at the end of the war. Thereafter, according to Wikipedia, in 1949 he emigrated to the United States. From 1950 to 1952 he was an instructor at Syracuse University's Armed Forces school in New York State, and beginning in 1951 he was also the director of the Foreign Language program for the US Air Force, and a television lecturer about the USSR and communism. From 1954 to 1956 he worked as a manufacturer in Mexico. Between 1956 and 1958 he was a librarian at Trinity University in San Antonio, Texas. In 1959 he became a professor of Russian studies at St. Mary's University in San Antonio, Texas. He died on 10 April 1968 in San Antonio, Texas.

As far as is known, Celmiņš steered clear of neo-Nazis in the US and actually began sabotaging the recruitment of Latvian Auxiliary Police that he was entrusted to do  during the German occupation, when it became clear some of these units would be used against civilians, including Jews.  Celmiņš modern-day fan club is openly anti-Semitic and its present leader Igors Šiškins (a Latvian despite his Slavic name), has served time for attempting to blow up the Soviet-era victory monument in Riga (the blast failed to seriously damage the monument).

Also forming a group within the Saeima to defend the lat are several deputies, led by Nikolajs Kabanovs of Harmony Center, whom many see as unsympathetic to “Latvian” causes. In effect, a strange informal alliance has formed between “pro-Russian” (an ethnic Russian) Kabanovs and the “renegade” nationalist Dombrava (Prime Minister Valdis Dombrovskis Unity Party has demanded an explanation and, possibly, sanctions for the young nationalist’s breach with coalition discipline).

My take is that if the parliamentarians don’t trigger a referendum, the loonazoids of the broader anti-euro movement are unlikely to be the ones on the front lines of gathering 30 000 signatures. Sociological studies show that Latvian society is conservative, politically authoritarian and economically statist/socialist, but most ordinary people would draw the line at throwing their signatures in with Šiškins or Kabanovs. The Antiglobalists ….perhaps.