Post-referendum notes

The Latvian referendum season is now over and the country is moving on to other exciting things... like over government trying to decide how to cut 1/5 of all programs in 2009 budget, while spending 2.5 mln lats (3.5 mln euro) on renovating president's residence. As usual, everyone is outraged but that doesn't change anything.

The conclusions from the pension referendum:

1. People don't always vote for more money. Before the referendum, I made a parallel with Hungary which had a referendum on fees for doctor visits and university education this spring and voted for free services, overwhelmingly. Latvia looked like the exact parallel: government saying "The government can't afford that" (higher pensions, in our case), opposition saying "Not it can". The difference was that there was more at stake. The Hungarian fees were quite symbolic, the Latvian pension increase more substantial. Both as a benefit to people and as a cost to state budget. Yet, Latvians did not show up for the referendum. Why?
   
2. The government stepped forward. As I described in my previous post, the government did come up with its own pension increase plan, which gave roughly 1/2-2/3 of the increase promised in the referendum proposal. The retirees deserved an increase and they got one, although a smaller one.
   
3. Quiet campaign. Unlike with the Constitutional referendum (where I got bombarded with "Dissolve the parliament" message from every billboard and TV ad), this campaign was much quieter. It felt as if many of opposition's parties had quietly agreed that increasing pensions more would indeed increase the already-growing-due-to-recession budget deficit by too much. Some of them stated "We support higher pensions" in one or two interviews but did not really attempt to campaign and make sure that people show up for the referendum. Even Stokenbergs' Society for (not so) different politics spent more than 100,000 lats to advertise for gathering signatures in favour of holding a referendum and less than 10,000 lats to advertise for the actual referendum. Did they disbelieve the proposal, as well?
4. Referendum fatigue. This is the third referendum in 1.5 years, with the previous two (security laws and Constitutional changes) having no result. There's some point at which people's attention starts to turn off. Latvia may beyond that point.

With referendums over, the Latvian politics looks like it used to be. The government is unpopular and so is the opposition. If they hoped for some political gains, they were wrong. Except for ethnically Russian parties, everyone else in the opposition is now at 2-3% range in opinion polls. More than 50% of Latvians are undecided or not going to vote, and that number has been slightly increasing in the last few months.

Latvian pensions referendum is failing

Today is the referendum on a major increase in Latvian retirement benefits. Here is part 1 and part 2 of the background on the referendum, that I wrote a few months ago.

As usual with Latvian referendums, people opposed to the referendum proposition are skipping the vote, to push the turnout below the legal threshold at which the referendum is valid. So, the result will be 95%-99% "yes" but the real question is the turnout.

For the law to pass, the turnout must be at least 1/2 of the turnout in the most recent parliamentary election. That means that we need 453,730 voters, which is 30.65% of all eligible voters, for the vote to count. According to the Central Election Committee, we have:

• a turnout of 0.59% in the first hour of voting (7am - 8am);
• a turnout of 9.50% in the first 5 hours (7am - noon).

If the distribution of turnout over the day is like in previous referendums, this is insufficient. The 7am-noon turnout was:

• 41.8% of the final turnout in the Constitutional referendum a few weeks ago;
• 40.7% of the final turnout in the security laws referendum of 2007;
• 37.7% of the final turnout in the parliamentary election of 2006;
  
• 43.8% of the final turnout in the referendum on Latvia joining EU in 2003.
  

Right now, we have a noon turnout that is 31% of the necessary one. Either we have a huge number of procrastinating voters (myself, I'm still thinking whether to vote "yes" or to skip the referendum for an effective "no" vote) or (more likely) the referendum is on its way to failing.

The next update on turnout is at 4pm. In previous referendums/elections, 4pm turnout was 69%-74% of the final one. 69% of the necessary 30.65% is 21.33%. If we are substantially below that at 4pm, we can be quite sure that the referendum has failed.

UPDATE (9:30pm): 8pm turnout numbers are out and, with only two hours left in voting (8pm-10pm), the turnout is 21%. It's now safe to say that the turnout is not going to jump to 30.65% in two hours. The referendum has failed.

UPDATE (3:00am): the turnout is 347044 or 23.45% of eligible voters. Everything has been counted, except for 4 voting places in Latvian embassies in America (due to time-zone difference), which should not affect the number much. Again, the referendum has failed and by a substantial amount. I will have a post-referendum post tomorrow.

Latvian pensions referendum, part 2

Brief summary. Latvian retirees are the biggest group of people who have been left out during the recent economic boom. While Latvian salaries have been growing at (an unsustainable rate of) 30%/year, the government has limited the increases in retirement benefits to the inflation rate or slightly above it. Combine that with the fact that the recent inflation has been particularly high for many basic food items... and a lot of older people are having trouble making ends meet without assistance from their children.

Current state, in numbers. Under the current system, retirees are guaranteed a minimum pension in the amount from 49.5 lats/month (70 euros) to 76.5 lats/month (109 euros). The smaller amount, 49.5 lats/month, is for people who contributed to Latvian social security system for less than 20 years (or not at all, like Janis Kleinbergs). The bigger amount, 76.5 lats/month, is for people who have contributed for 40 years and more.

The actual pensions depend on person's income before retirement and are usually more than the minimum (but still less than one would need to live on). At the end of 2007, the average pension was 124 lats/month (177 euros).

The referendum proposition. The referendum proposition would increase the minimum to 135 lats/month (192 euros) for people who have worked less than 20 years and to 202.5 lats/month (288 euros) for people who have worked more than 40 years. Thus, minimum pensions would almost triple.

I would calculate the average pension under the new law, but there's no statistics on the web about the distribution of Latvian retirees by the number of years worked. A rough estimate puts the average guaranteed minimum at 175-180 lats/month (250-260 euros).

There's 5-10% of retirees who get more under the current law. For the rest, the new minimums will be more than their current pensions. So, the average pension will be 180-185 lats, just slightly more than the average guaranteed minimum.

That makes it an increase of pensions by 45-50%, by January 2009 when the new law comes into effect. It's a huge increase and that's how the people writing the law intended.

Inflation effect. When the referendum proposition was written, Latvian inflation had not taken off yet. Now, the inflation is running at 17.6%/year. This means that this year's inflation adjustments will increase the pensions by slightly more than 20%. (The number comes out to more than inflation because the formula for pension increase also includes the salary growth which is at 28%/year now.)

So, when the law comes into effect at the beginning of 2009, the increase in average pension will be 20-25% instead of 45-50%.

Cost.This would cost 140-170 mln lats (200-250 mln euros) per year. That's 0.8-1% of Latvia's this years GDP and is substantially more than any of instances of "wasteful spending" (e.g. National Library or "the most expensive bridge in Europe") that the opposition has critisized the government for.

Given that a lot of retirees have a real difficulty making ends meet, I'm inclined to support a substantial increase in pensions. But it's an expensive thing.

Government's counter-proposal.Trying to fix the situation/to disperse the public anger, the government has come up with its own scheme for increasing pensions, by introducing a pension supplement of 1 lat/month (1.4 euros) times the number of years the person has contributed to the social security system.

If this gets adopted, both the average increase in pensions and the cost will be roughly the same as under the referendum proposition.

Summary. The meager Latvian pensions will see an increase of about 20%-25%, under either government or referendum proposals. The differences between the two are now primarily in the details of how the increase is distributed.

Even though the differences between government's proposal and the referendum propositions are much smaller than they used to be, I expect both sides to run a heated debate, along the lines of "Government will starve the senior citizens" and "Referendum will destroy the budget and the pension system"...

Latvian retirement benefits referendum goes ahead

The signature gathering is over for the referendum proposition on a major increase in the retirement benefits (supported by Štokenbergs' "Society for Different Politics"). Reportedly, there are 170,342 signatures, 21 thousand more than the required minimum of 149 064 signatures.

So, we might have two referendums this summer: on the constitutional amendment allowing to dissolve the parliament and this law. More on that later.

Referendum time?

Latvian Constitution allows popularly initiated referendums but the procedure is quite complicated. For the first stage, the proposal for the referendum needs to gather 10,000 signatures. If the signatures are gathered and verified by Central Electoral Committee, the process passes into the second stage. The Latvian government takes over the signature gathering process and it has to open places in every town and village where people can sign in favour of the referendum. If in one month, 10% of eligible voters sign, a referendum is held.

In practice, most of referendum ideas don't get out of the first stage. Since our independence in 1991 until last year, we' ve only had two proposals gathering 10,000 signatures. One, in early 1990s, was attempting to make citizenship laws extremely strict and fell slightly short of 10% in the second round. The other, by Social Democrats in 2000, was a law prohibiting the privatization of the national energy company, Latvenergo. It successfully passed both stages.

Now, we have two legislative proposals heading into the second stage of this process at the same time. The first proposal was born during the anti-government protests of last year. It would amend the Latvian constitution to allow for dissolution of parliament and early elections via a referendum (initiated through a similar 10,000-and-then-10% signature process). The main parties behind the proposal are Latvian trade unions and Aivars Endzins, the former judge and opposition's presidential candidate in 2007. Some of signatures were gathered during the anti-government protests, the rest throughout the fall and the winter.

The Central Electoral Committee has now successfully validated the signatures and the second stage will begin on March 12. If it succeeds, we can expect a referendum in June or July. And, if the referendum succeeds, I expect an attempt to dissolve the current parliament via the new law. And if that all works, we'll have early elections sometime in the second half of 2009. (All those signature-gathering processes are quite slow...)

The second proposal would raise the minimum old-age pension from 49 lats (70 euros) per month to 135 lats (190 euros). Latvian salaries have been growing quite quickly since 2000 but the pensions have not and many retirees have trouble making the ends meet (if they don't have children who can help). The signature gathering was started by a group of unhappy senior citizens and, a few days ago, Aigars Stokenbergs-lead "Society for different politics" group (which will likely turn into a left-of-center opposition party soon) stepped in. Now, they have the 10,000 signatures and the next steps will follow soon.

I am generally skeptical of referendums on money issues, since they can lead to people voting for impossible combinations of low taxes and high salaries/benefits. But it's a disgrace for Latvia to have people receiving 70 Euro/month retirement benefits.

Latvia's forgotten referendum

Tomorrow, Latvians will vote in a referendum. I haven't been writing about it much because the whole matter leaves me perplexed.

First, the history. On March 1, our parliament passed the amendments to two laws: The National Security Law and The Law on Security Institutions. Immediately after, the president Vaira Vike-Freiberga invoked a previously unused clause of Latvian constitution that lets the president to suspend a newly passed law for two months. If during the two months, a sufficient number of signatures (at least 10% of Latvian citizens with the right to vote) is gathered, a referendum is held.

The president accused the "oligarchs" in trying to gain the control over the security institutions and said that she was worried about NATO secrets falling into the wrong hands. That was enough to get signatures of 14.41% of Latvian citizens, resulting in tomorrow's referendum. Here is a conversation over the phone that I had with one of my friends who signed:

FRIEND: I signed the referendum petition today.
ME: Did you read what the controversial laws actually say?
FRIEND: No, but I've heard they are really bad.

This was fairly typical. I tried reading them and it left me perplexed. This is one law and this is the other one (both links in Latvian). The most serious change appears to be adding this sentence to the existing law:

For the parliamentary oversight, the members of National Security Committee of Saeima (the Latvian parliament), together with persons who have been authorized by the committee and who possess the top category clearance for access to national secrets, have the right to conduct examinations of national security institutions, to access the necessary information and documents, except for information about secret sources, to interview employees of national security institutions, to verify the legality and the necessity of conducted intelligence and countrintelligence operations.

I'm wondering what are the standards of other countries on this. Do the parliaments usually have the oversight or not? Unfortunately, the Latvian debate on the laws never got to this question.

The debate was just mudslinging about the evil conspiracy to gain access to the state secrets. Well, if we can't trust members of parliament who have top category security clearance, we might be in deep trouble anyway. (Of course, that assumes that Latvian security services actually possess some valuable information and I'm not sure about that, either.) On the other side, I generally trust Vike-Freiberga when she makes a claim that something is wrong in a major way...

As I said twice before, I am perplexed. But the number of signatures was enough for a referendum. To avoid being humiliated by a referendum loss, the government invalidated the two laws before the referendum. So, now we have a referendum on whether to abolish two laws that have already been abolished.

The people who hate the current government will regard this as a chance to show that they hate it, by voting the abolish the laws. The president has called on everyone else to vote. What comes out of it and what is the big picture... who knows?

UPDATE (7/8): The referendum is now over. According to preliminary results, about 23% of eligible voters showed up to vote. (For comparison, the turnout in the last parliamentary election was 61.88%.) Out of those who voted, 95.7% supported repealing one of two laws and 95.8% supported repealing the other.

Because of the low turnout, the result is not legally binding. This means that the two laws have only been repealed once (by the parliament) instead of being repealed twice (by both parliament and referendum).

New Era Party (which is in opposition) believes that the referendum's result shows that the government lacks popular trust. They've called for resignation of prime minister. Well, New Era Party seems to be using every chance to call for someone's resignation this summer...