Latvia: Cobbling together a "kludge" of a government

It looks like Latvia may have managed to cobble together a fragile coalition of Unity/Vienotība (V), the tatters of the Zatlers Reform Party (ZRP), six ZRP defectors and the National Alliance (NA). By now it should be obvious that the bright sun of change some Latvians have expected since the founding of New Era (Jaunais Laiks/JL) almost ten years ago, and that they expected, yet again, with the V alliance in 2010, and yet again with the dismissal of the Saeima and the new elections, has slipped back below the horizon. Another false dawn.

So what can we expect? Valdis Dombrovskis will continue at the helm of a listing ship with six loose cannons on deck (perhaps more, one can't say that the disintegration of the ZRP has ended with the mere loss of 27% of its parliamentary strength). There is already talk that oligarch influenced Green/Farmers Union (Zaļo Zemnieku Savienība/ ZZS, which neither particularly green nor agrarian) could be called out of its political leper colony to boost the coalition should all else fail.

That, of course, would be a symbolic death blow to the ZRP, which was built, overnight in political movement forming terms, on the idea of opposing the “oligarchs” and the practice of state capture. The six loose cannons have indicated this could be fine with them, providing that no direct representatives of Ventspils mayor Aivars Lembergs (from his Ventspils based “sub-party”) are involved. Dombrovskis, too smart not to be aware of the kind of crew he is sailing with, has also hinted that the ZZS might be let in the back door. After all, they are weaker than in the last Saeima, when they did everything to disrupt V's attempts to govern coherently. But then coherent governance has never been and is unlikely to be a Latvian priority in the foreseeable future.

The Harmony Center (Saskaņas Centrs/SC) has forecast – motivated by some bitterness – that the coalition will be lucky to last until next spring. They may be right. They have also indicated that as a harsh and firm opposition, the SC will continue to advocate social democratic policies. When it was offered a chance to govern together with the center-right, the SC quickly abandoned the social democratic populism that got it elected. More evidence that the SC are chameleons, never mind inexperienced (maybe a virtue where “experience” is being part of two decades of misrule) at national government.

After the “Sunday morning surprise” popped on everyone by the chief loose cannoneer Klāvs Olšteins (who burned through two political parties this year so far), it is safe to say that anything can still happen by the time the Saeima has to vote on the new government on October 25. But it seems likely that the present kludge (to use IT slang) of a government will get approved. Then the whole company of 100 merry pranksters will have to pass yet another austerity budget for 2012. How much more will have to be cut, and will the cuts keep up with the deterioration of the tax base due to emigration and the drift of the population into the gray economy is an issue that no one has talked about yet in and depth. Everyone has been watching the political circus or balagāns of the past five weeks. The real horror show may start with the budget. 

Ground control to the majors Valdis...

The political balagāns in Latvia has lifted off into new regions of outer space. Major Valdis Zatlers of the spaceship ZRP (Zatlers' Reform Party) has said it will take Imperial Star Cruisers (main battle tanks in Earth terms) to get him to undock from the Starship Harmony Center (SC). Now the other space major Valdis (Dombrovskis) has joined the orbital circus by proposing that all the spaceships dock and form a nice orbiting “ rainbow” with the Starship Unity (V), the Nationalist Falcon (NA) and even the almost launched into the Phantom Zone interplanetary garbage scow The Green Farmer (ZZS).

Ground control to the majors Valdis – this ain't gonna work, not in orbit, not on Earth.

The whole process of putting together some kind of workable coalition has gone far down the road to a total FUBAR (fucked up beyond all repair, in case you didn't know). It was probably heading there from the very start. Major “Big Wally” as I call him was determined from the start to link up with SC. Nothing was going to stop him, not even a deal with the other, “Little Wally” and V, to form the “core” of any coalition. Core meltdown. Bad in space, worse on earth.

So where does that leave things? The smart thing to do, to keep everything from de-orbiting and burning up, would be to let Major Big Wally remain docked and in orbit with SC. Everyone else stays on the ground, in gentle opposition and sees how many orbits the tandem can do by themselves.

This may be the only way out. Despite the fact that, programmatically, ZRP, V and the NA fit together, actually putting them together into a coalition has proven to be about as easy as the worst case scenario for assembling a piece of IKEA furniture. All the parts are there, just no one can fit them together and all attempts just fail.

ADDING THE LATEST

Well, maybe not. Now it is on again, yes, again, between V and the ZRP, who have, according to the latest news, both agreed to call for a kind of government of national unity minus the Green Farmer spacecraft, to be left in decaying oppositional orbit. That means that both the SC and the National Alliance will agree to sit in the same government. Yeah, right... Where is that cryptic IKEA diagram. Wait, these are parts from a different chair.

It is night, there will be real daybreak some hours from now, but this whole Saeima dismissal process, the referendum, now the latest elections, all point to yet another false dawn. The already totally cynical electorate will give whatever new government is cludged together a single digit rating even before it is formed.

Oh yes, then there is the little matter of the 2012 budget, with more spending cuts and the need to pour resources into what one can neither confirm nor deny is a rathole in the skyways – air Baltic. There, also, some kind of deal has been cobbled together and it will cost the state LVL 57 million in a first installment. Berthold Flick, who may well have been running the company against a merry mare's nest of revenue-suctioning parasite companies under his half-owned Baltijas aviacijas sistēmas (BAS), at least, is out of the picture. Whether he will sell his shares in BAS remains to be seen. In any case, it is starting to look like the biggest minority owner of air Baltic may be from the Russian sleazocracy.

Somehow I don't see the broad rattletrap coalition now being proposed as capable of getting much of anything, never mind the budget, done. Leaving the linked spacecraft of SC and ZRP to do it alone would be the test to quickly see whether they have the stomach (especially SC) to cut at least another LVL 100 million, if that is really the true figure. Just wondering, as 14 000 taxpayers, a record number, rising fast, have left the country this year to work and pay taxes where it actually counts and pays off. So I don't see tax revenues narrowing the budget deficit. Instead, the tax base will shrink by the combination of emigration and increasing tax resistance and evasion.

Let us see what marvels of outer space the next few days bring...

Latvia Heading for a populruppted or corruplistic government?

The Latvian affiliate of the German-based market research and polling company GfK has published a poll indicating that the Harmony Center (Saskaņas centrs/SC) will get 41 seats in the extraordinary Saeima elections to be held in less than a week. In the last elections to the 10^th Saeim,, GfK accurately predicted that SC would get 29 seats, which gives considerable credibility to their latest forecast.

The poll also sees the Green and Farmers Union (Zaļu un zemnieku savienība/ZZS) getting 13 seats down from 22, Unity (Vienotiba/V) would get 21 seats (down from 33), Zatlers' Reform Party (ZRP) would get 18 seats (as a new party, no prior presence), and the nationalist National Alliance (Visu Latvija-Tēvzeme un Brīviba-LNNK /NA) -seven seats.

The only combination that “works” from these forecast results is a coalition of SC and ZZS, easily getting 53 votes (or more, if support for the ZZS is stronger than anticipated). The resulting government will be populist – with the SC advocating more spending for pensions and social programs (even at the risk of expanding the budget deficit) and “corruption-tolerant” with the ZZS still holding out hopes that its backer and “eminence grise”, Ventspils mayor Aivars Lembergs, who face criminal charges for economic crimes, will someday be prime minister. Hence the idea that the government will be populruppted or corruplistic, combining the words populist and corrupted.

The SC and Lembergs have both entertained the idea of renegotiating Latvia's deal with the International Monetary Fund (IMF) in the vain hope of extending Latvia's very favorable credit terms (never mind that the IMF has not given any new loans at the same low rates) rather than re-financing the loans and going back to the market. Even if it worked, it would mean continued austerity, something at odds with the SC's attempts to be social-democratic.

The ZZS, a party ready to go in bed with almost anyone in order to stay in government, will continue to shield state-capture and corruption, though perhaps with less vigor since the SC will want to keep a relatively “clean” image. Indeed, one of the reasons people will probably vote for this party and forget the battles over “acknowledging the occupation” is that the SC has not, so far, been involved in any major corruption scandals (probably because it has been kept away from the trough by the bigger pigs).

Interestingly, Latvia will probably be praised for getting a government with its first ethnic Russian PM, Nils Ušakovs, a kind of Latvian version of Arnold Schwartzenegger – a politician of national scale who spoke the official language with a slight accent. There will also be well-grounded fears that an EU member state has been drawn further into Russia's sphere of influence, although the same could have been said about Germany and its pro-Russian policies some years back, for instance, regarding the Nordstream gas pipeline.

So, if the GfK poll and forecast are right, Latvia is heading for a change, putting the present government party in opposition, a different party and possibly an ethnic Russian prime minister in charge, and, after some years of slight progress in breaking away from corruption and free-spending, pedal-to-the metal government, a partial back-to-the future with populist spending and tolerance of, to put it mildly, politico-economic hanky-panky.

Patching together a government drags on

The formation of a new government under Valdis Dombrovskis (New Era/Jaunais Laiks) is being dragged out by political horse-trading even as the Prime Minister designate's own deadline for state bankruptcy (April or a little later) draws closer.

Until a viable or semi-viable coalition is formed, it is unlikely that the parliament (Saeima) will take any action on further budget cuts. The International Monetary Fund (IMF) cannot negotiate with anyone until a government is in place even if it was ready to change its terms of lending to Latvia (It has  been suggested that a larger budget deficit could be allowed to reduce the impact of further spending cuts on employment, etc.)

What is happening, however, is not surprising. The country and the political culture (post-1991) have no sense of solidarity in a crisis, politics "as usual" can continue no matter what is going on in the economy. Indeed, last-minute questionable deals can be signed by the outgoing government to build out Riga Airport with a Turkish company that has never worked in the European Union (EU). This is not to say that Turkish firms don't have a good reputation in areas such as heavy construction. It is simply that some of the other companies in the tender apparently were not convinced that the expansion of the airport should be as fast as the outgoing Minister of Transport  Ainārs Šlesers envisions it.  Some of them appear to have included this professional advice in their bid -- in other words, willing to do the job on realistic terms and not allow the customer to overspend and overdevelop.

It now appears that if and when a new government is patched together, it will likely carry on the earlier coalition traditions of somehow cluelessly muddling along (or earlier racing with the pedal to the floor, but not this time around) and trying to keep itself from falling apart by balancing party interests that may have little or nothing to do with a national interest. In fact, it seems that this concept, except as political rhetoric, doesn't really exist in Latvia and probably won't for the foreseeable future.

Right man(?) too late

Imagine that someone had stepped up to the bridge of the Titanic, relieved the captain and said: "The biggest mistake on this voyage was setting out with too few lifeboats and it was wrong not to sail south of these icebergs, as we just bumped one."
The next thing the replacement captain says is : "Of course, as things are now, we will sink and more than half the passengers will drown."
That is about how I see the nomination of the New Era (Jaunais Laiks/JL) Europarliamentarian Valdis Dombrovskis to form a new government.
Dombrovskis, 37, is a pretty smart guy (degrees in engineering and economics, including both education and research work abroad in the US and Germany) and probably honest and straightforward. That is why he said that one of the first tasks of his new government would be to reduce spending(i.e. the budget deficit) by 700 million LVL in order to comply with International Monetary Fund (IMF) terms for its loans to Latvia.
The Prime Minister designees statement comes on the heels of a report that Latvia's so-called social budget will have a shortfall of 300 million LVL. Unless Dombrovskis has added this into his figure (and Latvia has separated the "social budget"which is funded by social taxes on payrolls from the "state budget"), it looks like the country will be at least 1 billion LVL in the hole this year.
If the budget deficit is not cut by 700 million LVL, the country will essentially be bankrupt, Dombrovskis said. Although he called cutting pensions a "red line" that his government will not cross, the possibility has apparently been brought up by the IMF. Pot banging little old ladies in the streets -- thousands perhaps-- anyone? Or how about real wild in the streets riots with kids throwing stones and burning cars in support of their grannies?
In order for Dombrovskis to form a government, he will need the support of the largest parliamentary party, the People's Party(Tautas Partija/TP) plus a few other parties. In other words, most of the Ugly Humpty Dumpty that presided over the complete clusterf**k of the Latvian economy will have to be put back together again. That does not bode well, but probably there is no alternative.
JL also doesn't have a spectacular record. Formed as a clean government, new approach party that ran in the 2002 elections and won big support, it almost immediately stumbled when Prime Minister Einārs Repše appointed a Minister of Health, Āris Auders, who proved to be a double-dipping sleaze bag who had done state financed orthopedic operations while taking big-time tips in envelopes from his patients (for "his golden hands".) The new government in 2002 also sharply raised ministerial salaries without having done very much (in was only in office a few weeks).
Repše as PM also came across as more than flakey, with a penchant for odd-ball, home made light aircraft, a series of wacko investments with loads of (borrowed?) money and business ventures with one of his series of girlfriends (a 500 000 LVL yacht that would repay itself from rich charter customers sailing the smooth sunny waters of the Baltic -- well, not in February, nor eight or nine other months). Some of these ventures came after Repše was forced from office, but they reflect on his judgement and strangeness. It is rumored Dombrovskis wants him as Minister of Finance.
In addition, JL is a weakened party, with some of its leading members splitting off to form the Civic Union (Pilsoniskā Savienība/PS). Parts of the hatchet that was used for the chopping are still protruding above ground, rather badly buried out of the necessity of the present economic crisis.
Unfortunately, it appears will will, instead of the idiots running the country up t0 now, a non-idiot who can do almost nothing to prevent the inevitable consequences of his predecessor's actions. The captain of the Titanic, perhaps the last man to sign off on the log-book of the ship, can be formally held responsible for the sinking. Now the TP has passed the log book to Dombrovskis and the JL, so they can sign before the waves close over their heads. Smart move??