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.

Act one of the "balagāns" ends

Act One of the balagāns seems to have ended. At square one, namely, the coalition that most people thought they were voting for – a center-right government consisting of Zatlers' Reform Party (ZRP), Unity (Vienotība/V) and the breath-taking (if you try to say the whole thing in one breath) All for Latvia/Fatherland & Freedom/Latvian National Independent Movement or simply the National Alliance (NA). It took just three weeks of acrimony, betrayal, reconciliation, adultery and the political equivalent of make-up sex to get back to where everyone started – at least everyone who could a) count the Saeima seats won after the September 17 election and b) compare and contrast the party programs of those elected to the Saeima.

Looking at things that way, one can say – good for you, Harmony Center (Saskaņas centrs/SC),you added two seats and became the single largest party in the Saeima! However, your program – at least up until the chameleon hopped up in front of a picture (symbolically speaking) of Valdis Zatlers and Valdis Dombrovskis and started to try to match its background – was completely mismatched with these guys. The ZRP and V are not populist social democrats. Nor is V “pro-Russian” in the same sense that SC appeals to its Russian electorate. Neither is it anti-Russian and much of what it says could appeal to middle-class ethnic Russian voters.

The same goes for the ZRP, which has proposed and may still get ethnic Russian economist Vjačeslavs Dombrovskis appointed to a ministerial position. He would be, technically speaking, at least the third ethnic Russian minister after Vladimirs Makarovs of the nationalist Fatherland & Freedom and Vasilijs Meļņiks (finance minister for five days in 1997). However, the ZRP has, for three weeks, clung to the idea of having the SC as a coalition partner almost like one of those attack dogs whose jaws, once they bite, cannot be opened without cutting off the beast's head. The news that the ZRP has agreed to what was obvious three weeks ago came the night of October 10, so there is still time for surprises before the new Saeima meets.

As for SC, their “exclusion” from government is not a “Russian vs Latvian” thing, at least not in rational terms. The ideology of SC and the other potential coalition partners didn't match. You cannot match shape-shifting “social democrats” who voted to protect an oligarch (Ainārs Šlesers) from the law with centrists, much less with nationalists. The ZRP was crazy trying to do so and persisting in its obsession for three weeks, discrediting (if that is at all possible) the Latvian political system even further.

The potentially loose cannon in the upcoming coalition is the NA, who know that they probably can test how far they roll around on the heaving decks of the coalition without any serious consequences. Unlikely that they will be dumped in favor of the SC, after all, but perhaps they should not tempt fate. On some points of logic, the NA does make sense. No one should accept the facile phrase that Latvia was occupied, but there are no occupiers. To say this, even in 2011, is like going back in time to 1965 (20 years after the war) in Germany and saying : “There was a Holocaust, but there isn't anyone around who shot or gassed Jews.” Of course there were such folks around, and they were found and put on trial.

The expression “there was an occupation, but there are no occupiers” is an illogical way of saying that most, perhaps the vast majority of non-Latvians who arrived during the occupation did not do so with the intent of actively enforcing the totalitarian regime. Clearly, those who were members of the security service (the KGB) and the military (the Soviet army wasn't just visiting Latvia for 50 years for vacation). Soviet army veterans have essentially been blanket pardoned for, technically, being “occupiers” under the treaty that ensured the removal of ex-Soviet Russian troops. There has not been a concerted effort to find and punish ex-KGB, a number have even become businessmen and politicians (such as social democrat Juris Bojārs).

What one really means by saying “there are no occupiers” is that one isn't going to make a big deal of it unless there is a clear case of someone being a “ripper of fingernails” (nagu maucējs in Latvian). Also, there is no point in going after second-generation “occupiers” or those who simply came along for the ride thinking that the “known world” for them was the Soviet Union. The country has already lost some 300 000 people of all ethnicities to emigration, and trying to get even more to leave simply because they are Russian is not going to help things, especially the economy.

Keeping the NA from going off the deep end on these issues is going to be a major concern for the new coalition (if it hasn't already fallen apart as I write this). The other concern is what Zatlers, who has proven himself somewhat of a whackbat (amalgam of wacko and batshit) may do if offended by the NA and tempted to seek solace with his “first love” the SC. Which is not to say that the center-right coalition that has apparently been stapled together couldn't get the support of the SC on some issues. That would almost be like normal European politics. Nice thought. But this is Latvia...

A new, bizarre act in Latvia's political "balagāns"

The political balagāns (carnival) continues with a wee-hours-of-the night coup by the Zatlers Reform Party (ZRP) to bring Harmony Center (Saskaņas Centrs/SC) into government and offer the post of prime minister to Valdis Dombrovskis of Unity (Vienotība/V). Somehow I don't think this was coordinated between ZRP and V, in accordance with an agreement between both parties forming the “core” of any next coalition that exactly this kind of thing would be done by mutual agreement. For a number of reasons, the ZRP simply decided to screw its potential coalition partner, set off a bombshell in the middle of the night and get the whole country (or that part of it writing comments on internet portals) up in arms.

One reason former president Valdis Zatlers himself mentioned (and this was hinted at when he was forming his barely three-months old party) was to bridge the ethnic gap in Latvia between Latvians and Russians. At least one political scientist, Iveta Kažoka, called this “historic” and a good thing, sorta... In purely logical terms, it makes considerable sense. Latvians and Russians face the same economic challenges – despite some GDP growth, the country is still way below where it was in 2007 or 2008 and will not clamber back until the middle or latter part of the decade. Unemployment hits Latvians and Russians equally hard. Even emigration is an issue if we talk about ethnic Russian voters, which means they have citizenship, a passport and are free to go look for a better life in the rest of the European Union. Ethnic issues are largely historical and it is the future – will Latvia have one or not – that matters. Or so it would seem.

In reality, ethnicity overrides any and all common causes, except in fleeting, temporary situations, like hockey championships, where Russians and Latvians unite behind their (heavily Russian) national team. The issue of occupation and who or what was responsible for it (between 1940 and 1991, twenty years ago) is still emotionally pivotal and the main reason the National Alliance (All for Latvia/Fatherland&Freedom/Latvian National Independence Movement –NA) will see cows flying in formation before it joins any government with the SC in it.

It is not clear what would happen if the SC electorate were all to agree, not only that there was an occupation, but that they all, whether born here or not, are occupiers, including minor children, housepets and lawn statues of dwarfs. The NA, I am sure, would then urge them all to go back to Russia, acting out its deoccupation fantasies. That might have worked in 1991 -1992, but not anymore. Besides, Russia is an increasingly authoritarian bardak of corruption and cronyism that even puts Latvia to “shame”. However, a virtual deoccupation has already occurred in economic and demographic terms – at least 300 000 people, most of them economically active, have left the country, probably never to return (in any permanent sense). Trouble is, only some of them are Russian.

The other reason that Zatlers wants to have a three-party ZRP, SC and V coalition is that it would have more than a two-thirds parliamentary majority needed to change the constitution and allow popular elections for president, as well as granting the new, popularly elected presidency broader powers. Presently, the Latvian president is largely a figurehead. Cynics say the only reason Zatlers dismissed the parliament was in order to run for the new, more powerful office of president a few years down the road. This is probably not true, there was good reason to dismiss the Saeima with 94% of the electorate approving Zatlers' move in July.

As far as V and the coalition offer from the Zatlerites goes, it looks like the party will fulfill a cynical name I gave it back during the summer – izjuceklis or something that will tear itself apart. The former Citizens' Union (Pilsoniskā Savienība) has declared its opposition to forming a government with SC and there is talk of some V members of parliament quitting the party. This would leave ZRP with the other option of forming a bare-majority government with the SC, resting on 53 votes in the Saeima. It would also leave two inexperienced parties running the country, at least one of which has a dubious record on being law-abiding (voting against a search of the oligarch and Saeima deputy Ainars Slesers' residences) and of keeping promises to its own voters and internal partners (Nils Ušakovs has said he will boot the crackpot neo-Communist Latvian Socialist Party out of the SC if that is what it takes to get into the coalition).

So the balagāns is far from over and Latvia probably faces more years of acrimonious, bumbling government for the next few years, perhaps followed by a possible nationalist backlash in the regular Saeima elections in 2014.