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RIGA - New Era party chairwoman Solvita Aboltina says she is confident that the government, led by Prime Minister Valdis Dombrovskis (New Era), will complete its term which ends with next year’s Saeima elections, reports news agency LETA. Aboltina stresses that “This government is capable of doing what it has to do, it has a plan for economic recovery of Latvia, for defending its residents, for ensuring social protection and the rule of law.”
Dombrovskis’ government has finished a “huge job,” and the adopted state budget is a step toward stabilization of the country’s situation.
There has been constant sniping at the Dombrovskis-led ruling coalition by other parties throughout the 2010 budget process, with rumors swirling of the government’s imminent collapse.
The budget negotiations certainly were difficult. The IMF-led group of lenders had stringent demands in bringing down the budget deficit, by 500 million lats (714 million euros), through spending cuts and tax increases, as a condition to continue to receive aid funding.
Speculation continues about a possibly unfavorable Constitutional Court decision regarding pension cuts, though this is “inappropriate,” considers Aboltina. She says that some politicians’ rhetoric, expressed publicly, is an attempt to influence the Constitutional Court and destabilize the country. Aboltina noted that “all the political forces represented in the coalition are responsible for the [budget] decisions taken.”
The board of Latvia’s First Party/Latvia’s Way said on Nov. 30 that a new government should be formed, one that is “capable of action and has a clear vision of how to increase revenues and reduce the tax burden in Latvia. The new government should boost exports of Latvia’s goods and services, and carry out state administration reform in a fast, efficient and transparent way.”
Chairman of the Board of People’s Party Andris Skele announced on Nov. 27 that the People’s Party will only support Dombrovskis’ government until it remains capable of action, saying that there is no need for a “government as a decoration.” Skele has said that if necessary, he would be ready to form a new government before the next parliamentary elections.
Skele said last week that he will come up with several proposals for optimizing the tax system in Latvia that will facilitate work for businesses, whose tax payments could “revive the economy of Latvia.” The People’s Party chairman met with Dombrovskis Dec. 3.
This is the same People’s Party that resisted most changes to the tax code, to modernize it and broaden the tax base, in the negotiations leading up to the adopted 2010 budget.
At the meeting Skele also suggested reducing the number of ministries to eight, thus making the state administration more “compact.” Dombrovskis agreed that the number of ministries should be reduced, however, he said that this will be a task for the next Saeima, after the elections. Skele could not specify what changes to the current tax policy his party is planning to make.
Dombrovskis told reporters that he is ready to support the proposals made by the People’s Party, however, it must be made sure that the fiscal outcome of these suggestions will be positive, or at least neutral, and that the international lenders support the new measures. The prime minister added that he supports the suggested reduction in the number of ministries, however, so far all the coalition parties have rejected the plan on reforming the state administration system, proposed by the People’s Party and presented by the Regional Development and Local Government Affairs Minister Edgars Zalans, therefore “more work needs to be done.”
Dombrovskis pointed out to Skele that the People’s Party should pay more attention to the situation in the Eastern and Children’s Hospitals. Both Dombrovskis and Skele underlined the need to continue work on optimization of uptake of European Union funds.
Speaking before the final budget vote, Dombrovskis had said that he sees no reason to resign after its adoption, that “there were no reasons why I should resign.” He noted that the toughest tasks for his government have been to pass the 2009 budget amendments and adopt the 2010 budget bill.
Asked about the People’s Party’s wish to cut taxes at the same time that Dombrovskis and Finance Minister Einars Repse (New Era) were talking of raising them, the prime minister replied that the intentions of the People’s Party were “quite obvious, and could be seen already from the first documents that were signed with the international lenders.”
In these documents, then-Finance Minister Atis Slakteris (People’s Party) approved, among other measures, raising the value added tax (VAT) by two more percentage points as of next year, Dombrovskis said, urging the public to distinguish “reality from pre-election populism.”
The prime minister also recalled that the People’s Party has held power for the last several years, when “fundamental mistakes in the Latvian economy were allowed, as a result of which we are currently in this crisis.”
As the crisis worsened, the People’s Party was the first one to “move aside” and give up power, so as to let others make the difficult budget decisions. New Era stepped up to “lead the country out of the crisis,” Dombrovskis said. He pointed out that now, all of a sudden, the People’s Party has “come out into the light and again is preaching to others.” Dombrovskis said that actions by the People’s Party were “not serious politics.”
The Constitutional Court ruled Nov. 26 that Saeima did not violate the Constitution in amending the Law on Pensions, in which pensions won’t be indexed this year. The Constitutional Court opened the case in April after 20 Saeima members turned to the court protesting the March 12 decision of Saeima to not index pensions this year.
The Constitutional Court established that Article 1 and Article 109 of the Constitution were not violated, as the claimants had claimed in their petition. Article 1 of the Constitution states: “Latvia is an independent democratic republic,” whereas Article 109 states: “Everyone has the right to social security in old age, for work disability, for unemployment and in other cases as provided by law.”
The Constitutional Court is still reviewing the case on a 10 percent reduction in pensions for the 2009 - 2012 period.