Seven Bold and Beautiful Years in Chez Latvia

  • 2010-02-04


By Edgars Kariks, Resident of the Republic of Latvia January 2010    

The Parliamentary election of 2002 to the 8th Saeima took place against a background that included perhaps the most significant challenges to Latvia since the restoration of independence. Latvia was, at that time, headed into the final negotiation stages to join the European Union and was also expecting to be offered full membership of the NATO alliance later that year.    

A week before the elections to the 8th Saeima, in October 2002, voter surveys and informed guesses indicated a very tight race among the three newcomers: the New Era Party (JL) led by charismatic former Bank of Latvia president Einars Repse; the People’s Party (TP) led by three-time former prime minister Andris Skele; and the For Human Rights in a United Latvia Party (PCTVL) led by Janis Jurkans. The PCTVL party was at that time a coalition of center-left and left-wing parties united by a concern for the apparent discriminatory state policies against Latvia’s Russian speaking minority. Two of the left’s coalition parties were led by people who were not then legally entitled to stand for election: Alfreds Rubiks, former communist mayor of Riga who had served six years in jail on charges of treason, and ex-communist Tatjana Zdanoka. 

Jurkans of the PCTVL had just had an audience with Russian president Vladimir Putin, and as a result sent quite a chill down the spines of some two-thirds of Latvia’s eligible voters, much to the delight of the remaining one-third dissatisfied mostly non-Latvian-speaking citizens.    

Prime contenders expected to surpass the 5 percent barrier of eligibility included the First Party (LPP)… also known as ‘the Clergymen’s Party,’ and the Greens and Farmer’s Union (ZZS) which appeared to have united the Euro-skeptics among farmers and small businessmen.    

As a part of its pre-election anti-corruption campaign strategy, Repse invited all of his party members, in an ecumenical service in Riga’s Dome Cathedral, to publicly swear before God that they would be true to their word and that their actions and integrity would come under the scrutiny of the Almighty.  This action was seen by many as a rather radical (perhaps cynical) public statement and theatrical gesture… however, it was supported by the leaders of the nation’s major confessions.    

The LPP, which was then led by church minister and former boxer Eriks Jekabsons, also campaigned heavily on the anti-corruption issues so prevalent in day-to-day Latvian society at the time. The somewhat pressing issues of Latvia’s immediate future - entry into the NATO alliance and membership of the European Union, were not targeted as critical electioneering issues as these great expectations were in effect considered fait accompli by the vast majority of voters.    

On October 5, 2002, as it turned out, some 72 percent of eligible voters did their duty calmly and with admirable social conscience, perhaps encouraged by the then president of Latvia Vaira Vike-Freiberga, who said that it is every citizen’s moral obligation to vote and to support the achievements of a free democratic Latvian state and to not slow its momentum into the 21st century. Compared to parallel elections in Brazil and in Bosnia, the world press coverage of the Latvian scene was negligible… almost a non-event, which in a way could be interpreted as a compliment to the level of social development achieved since independence, or, it could also have been an indicator that while social reforms in Latvia had been progressing, Latvia was perhaps not an interesting neck of the woods.    

The day passed uneventfully… as peaceful as in the eye of a hurricane. The streets of Riga were calm and it was obvious that the people were taking their duty seriously but relaxed. There were some noted attempts at vote buying. Students at a University of Latvia hostel were offered free beer and cassettes if they voted for a certain party. In one polling post a radio was ‘casually’ blaring out voting campaign propaganda and a busload of nearby country town pensioners was ferried to Riga where they were treated to a free lunch and free beer in exchange for their votes. But all in all, these were minor and unrelated events, more comical in nature and not of any national significance.     

Less amusing were the options for disabled persons. Hardly any of the nations 939 voting stations were equipped to handle the requirements of mobility-challenged individuals… this writer was among those severely inconvenienced, even in the otherwise expansive premises of the Latvian Society of Riga.     By the time counting was completed in all 939 centers, the JL had received 23.93 percent (26 seats) of the vote, PCTVL – 18.94 percent (24 seats); TP – 16.71 percent (21 seats); LPP -  9.55 percent (10 seats); ZZS – 9.465 (12 seats) and the Party for Fatherland and Freedom (TB) – 5.39 percent (7 seats).    

The previous prime minister, Andris Berzins, and his party Latvia’s Way (LC) did not pass the 5 percent barrier and consequently did not make the grade into the8th Saeima. Latvia’s Way had been a major party since independence in 1991, and this election loss was seen as a significant protest vote… amplified by the dramatic rise to second place of the For Human Rights and a United Latvia Party (PCTVL).    

At the time there was a general across-the-board acceptance of this outcome by the community and no protests were sounded from any of the parties, including LC. The only real surprise, and perhaps even regret, to the pre-election projections was the complete disappearance of LC and its universally amiable leader from any role in active government.    

The only significant new face on the political block was that of Repse. Not unknown to society and the community at large, the highly successful former banker was now head of the strongest party, yet he did not have the outright majority he had hoped for.    

The problems facing the JL party in the first few days were quite serious. Perhaps the most important problem to solve was the logical creation of a lasting center-right coalition. All the party leaders were strong-willed and temperamental maestri in the true sense… who did not consider the art of compromise to be a political asset. Even as late as October 8, 2002, Repse sent some rather overt smoke signals that if the leadership of the TP was unable to ‘toe the line,’ then it will end up in the opposition!  It remained to be seen whether the Russia-biased and leftist PCTVL would become a liquid asset in the hands of JL, or whether a numerically logical and balanced center-right working partnership could evolve. The very art of compromise had been the key to the longevity of LC over the previous nine years.    

The festive season of late 2002 early 2003 was to become a turning point in Latvia’s journey. The Latvian cabinet, it seemed, had decided to enjoy two Christmases (a traditional AND the Orthodox). As if destined to imprint forever a momentous fiscal turning point on the Latvian political landscape, newly elected Prime Minister Einars Repse, acting on an unprecedented, unforeseen, and formally unscheduled move, persuaded the government to adopt a resolution on January 7, 2003 – Russian Orthodox Christmas – to triple all ministerial monthly salaries, from a mediocre 650 lats per month (just over USD 1,000) to an impressive 2,200 lats per month… almost thirteen times the then average wage of 170 lats/month and 31.4 times the state’s minimum wage.    

The decision on this raise, which cost the taxpayers a projected additional half-million lats annually, was passed in less than ten minutes. All ministers present, except for Culture Minister Inguna Ribena, had approved the measure. Ribena later noted that she personally thought that the government could have waited at least six months into its term before making such a quantum leap.    

Public reaction to this decision was predictably harsh. But it was, as Repse himself noted, a single-handed effort, a fait accompli for which he publicly undertook full responsibility.  “If I could have raised the salaries myself I would have done so, but I needed the support of the ministers,” he said. “This decision is correct and absolutely necessary. Ministers have to make decisions about millions of lats and their responsibilities are much greater than those of public servants.”    

One of the coalition parties, the Greens and Farmer’s Union (ZZS) stated that the pay hike should not have been approved, stressing that Latvian ministers already had the highest salaries amongst their colleagues in the neighboring Baltic states of Estonia and Lithuania. The ZZS had asked the prime minister to reconsider and possibly reverse the decision, yet at the fateful cabinet meeting, ZZS ministers did not offer such protest.    

In a memorable, defensive and rather ejaculatory statement explaining the move, and which echoed throughout the land, Repse said: “I’m not going to work and go naked and hungry (for my effort).”  This statement drew predictable outcries from members of the medical and teaching professions in particular, who were then on a survival minimum income of between 90 – 200 lats per month.    

The prime minister’s spokesman, Dans Titavs, rationalized the salary hike as part of the government’s anti-corruption campaign. “High salaries,” he said, “will encourage ministers to work hard and devote all their energies to the state while delimiting the temptation to pad their income with external funds, legitimate or otherwise.”    

All of this occurred during a time of public belt-tightening, with government cuts demanded and expected to the tune of up to 20 percent of then current expenditures. Even the Cabinet of Ministers demonstratively slashed such ‘luxuries’ as mineral water at meetings and by reducing central heating in less-used spaces within government buildings.    

On January 3, 2003, just days before the momentous decision, the government gazette Vestnesis quoted Repse as saying: “At this time, all tasks are important because we have started a new way of doing things, both internally and externally. There is so much to do, it is not easy to separate the less important from the more important.”    

The Web site of the prime minister’s party, JL, announced that the New Era management style will be open, with a strong ethic and no tolerance for corruption. “Public servants will be motivated to serve the state… all financial dealings will be open and accountable… adopted resolutions will be clear and motivated.”    

At the time, it seemed that what Repse actually wanted to achieve was to take the Latvian economy, by quantum leap, into line with Western standards. A laudable ambition.  Repse had set his sights on a future in which all Latvians could live in the best of economic climates. If anybody was to finally drag Latvia out of its ‘Squelcher in the Mire’ mentality, and at warp speed, Repse was the man of the moment… in tandem with Vike-Freiberga… indeed a dynamic duo.    

Seven years ago, in 2003, Repse had before him the formidable task of attaining the conditions in which every Latvian could earn an income - times four - in salaries, pensions, and other benefits… to take the country out of economic slavery and to transform it into a fully developed nation, NATO alliance member, and equal EU partner. The benefits were to be enormous. Latvians would finally be willing and able to abandon the ways of the Gray Economy, to pay their fair share of taxes; to pay real money into real private pension funds and so to relieve the state of this massive burden. Latvians would be able to afford the best possible in medical insurance… again, relieving the government of this burden so that it could focus on those truly disadvantaged.  Latvians would now be able to buy houses and property at realistic prices, on guaranteed credit and competitive interest rates as an escape from the unbalanced user-pays benefits world of the renter-landlord equation.    

Cash on hand left over from ‘a good day’s pay for a good day’s work’ could go into bank and credit union interest-bearing deposits. Money would be in circulation throughout the community … real cash not virtual credits … the economic lifeblood of the nation.    

Latvians were to enjoy not only new wealth but also better health… no longer having to juggle their lives 24/7 between three or four sources of income (we pretend to work – they pretend to pay us) three of which were probably illegal.    

Seven years ago, it was no coincidence that Repse’s signature appeared on every bank note issued in the Republic of Latvia. What better sign of durability after his ten years at the helm of the Bank of Latvia during which time the stability of the lat was internationally admired in the context of the surrounding volatile economic climate.    

It is now the year AD 2010. Traditional Christmas baubles have all been put away and the big stores are offloading discounts galore. Our Orthodox neighbors have also celebrated their Christmas (January 7).    

Seven years have passed… all are recorded in the various pages of history and no doubt somebody will write it all up one day, for our children, and for their children who may one day take an interest in the early economic life of the second republic.    

Repse is now Minister for Finance. His responsibility is Supply. He has always seemed like a hard working fellow. But these days, even he has (or so it seems) been reduced to wearing the same suit to work day in day out. A nice show of solidarity, if nothing else.

Latvia, through its current Prime Minister Dombrovskis, has continued to place its trust in its Minister Repse. May the God that Repse placed himself before seven years ago guide him in the many decisions that lie ahead and may he never lose faith in the intent of his original mission

Edgars Kariks Resident of the Republic of Latvia Riga, January 7, 2010