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.