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.  

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.