Latvian housing bubble, part 2

As I mentioned in the previous post, Latvian real estate prices have increased 61.2% in one year. The most important reason behind that is, probably, the wider availability of bank credit in Latvia.

In 1990s, when I grew up in Latvia, it was fairly common to pay the entire amount upfront, when buying an apartment. The economy was fairly unstable and, if the banks issued credits for purchase of housing, the credits would be repayable in 5 years and would have quite high interest rates (20% or so? I no longer remember exactly). A friend of mine took one of those and then realized that the terms were so bad that he would have been better off if he had borrowed money from friends instead of the bank. This is largely why apartment used to cost 7000 or 20000 dollars those days.

With Latvian economy recovering from the post-Soviet slump and the outlook for the future becoming more certain, banks became more willing to issue long-term loans to their customers. Interest rates fell, 5 year loans were replaced by 15 year, then 30 year, than 40 year. When Latvia joined European Union, the interest rates fall to a level than was just slightly higher than in Western Europe. Latvia had gone from post-Soviet economic chaos to normalcy in just 10 years.

The speed at which credit became available was, however, much faster than the speed at which new apartments were built. And, so, the prices spiralled up. Also, since most Latvians don't have much savings, many of new loans (from 40% to 70%, depending on the bank) have been financed by borrowing from abroad. The foreign banks now saw Latvia as a part of European Union (rather than part of post-Soviet chaos) and were very willing to lend the money. The inflows of credits from foreign banks soon became comparable with the entire export revenue of Latvia:

• Latvian exports in 2006: 3.294 billions lats.
• Money borrowed abroad by Latvian banks in 2006:2.214 billion lats

In short term, this influx has been good for Latvian economy. Whenever someone buys an apartment with borrowed money, someone else gets the money by selling the same apartment. And that money is then spent in Latvia on goods and services, benefitting people who produce or sell those goods and services. Latvian economy has been growing 11% per year, average salaries are growing at about 30% per year. The tax revenues of the government are expected to grow 29.6% this year, which might mean that Latvian teachers will not be as underpaid as they used to be.

In longer term, it is not clear how long those trends will continue. Foreign banks might not be willing to issue new credits in so large amounts to Latvia forever. When the inflow of new credits into Latvia slows down, it can bring down the housing prices and, more generally, slow down the Latvian economy quite a bit.

Part 3 on real estate and Latvian economy coming in a few days...

Latvian housing bubble, part 1

I might move back to Latvia later this year or in 2008 and I just started researching the real estate market, over Internet and by consulting friends in Latvia.

It's quite expensive. 1 bedroom apartments in Soviet era buildings (built 20-40 years ago) cost from 70,000 to 110,000 Euros (100,000 to 150,000 US dollars). Bigger apartments or ones in newly built buildings are even more. Houses start at 200,000 Euros (260,000 US dollars) and can cost much more if they are in a good location. (I'm not even trying to figure out how much more. I wouldn't be able to afford that on a Latvian salary anyway.)

It's not quite London or New York prices but, according to newspapers, real estate in Riga is already more expensive than in Vienna or Frankfurt. And I've heard stories of people who have sold a run-down house in Latvia and discovered that they could buy a house at a much better condition on the Mediterranean coast of France for the same amount. At the same time, the average income in Latvia is still 4-5 times less than in US or France or Germany. As a result, most of population is completely priced out of the housing market.

It wasn't always this way. In mid-1990s, one could buy an apartment in Riga for 20,000 dollars. The only similarity with today is that it was unaffordable for most people. The incomes were much lower than now and bank credit was almost unavailable. Now, 40-year loans are common, the interest rates are almost as low as in Western Europe. The incomes have increased substantially, except that...

The increase in real estate prices has outpaced that all! Economists are talking of global housing bubble and Latvia seems to be at the forefront of it. The home prices in Latvia have grown by 61.2% in 2006, more than in the any other country in the world. And that comes after a similar more than 60% increase in 2005.

I'll post some more thoughts on the Latvian real estate bubble in the next few days...

Return to normalcy

Edward Lucas has an interesting column in the Economist. I think the facts are spot-on but I would like to argue about the conclusions.

Lucas starts by contrasting our president-elect Valdis Zatlers with our outgoing president, Vaira Vike-Freiberga:

Optimists hope that Valdis Zatlers, an orthopaedic surgeon, will grow into his new job as Latvia's president. But even his doughtiest supporters doubt that he will fill the exquisite shoes of his predecessor, Vaire Vike-Freiberga, a steely-minded émigré polyglot who ushered her small Baltic country into both the European Union and NATO.

Then, he observes that this is a part of a bigger trend. The previous generation of Eastern European leaders had many big figures:

Lech Walesa of Poland and the Czech Republic's Vaclav Havel remain world famous. Poland's Aleksander Kwasniewski was widely admired abroad for his diplomatic skills. Reformist politicians such as Estonia's Mart Laar, Russia's Yegor Gaidar and Slovakia's Mikulas Dzurinda wowed the policy wonks with their zealous embrace of flat taxes and free-marketry.

Now, it's different. Only Russia's Vladimir Putin and Estonia's Toomas Hedrik Ilves qualify as "big figures", according to Lucas. As for the rest:

A lot more typical are such political leaders as Slovakia's prime minister, Robert Fico, or Hungary's Ferenc Gyurcsany: wily political operators with good business ties and a populist touch.

I think this trend is a part of Eastern Europe returning to normalcy, after the Soviet oppression and the chaos of first post-Soviet years.

Great leaders often emerge as a response to great challenges. When Vaira Vike-Freiberga came to power in 1999, Latvia had to convince the Western world that our country is a part of it. During her presidency, Latvia succeeded in that. Latvia became a member of the European Union and NATO.

The same thing happened in other Central European countries. Lech Walesa and Vaclav Havel were symbols of Poland and Czech Republic rejecting Communism and aspiring towards the same values as Western Europe. Now, the values that Walesa and Havel fought for are universally accepted in their countries. And, once something is universally accepted, there is no need for a visionary leader articulating that.

Today, the main challenge for the countries that joined European Union in 2004 is ensuring competent day-to-day management. We are not making a fundamental choice between democracy and totalitarianism, or free-market and centralized economy any more. Those choices have been made long ago.

As a result, there is not much space for visionary leaders any more. Businessmen and managers are taking their place. The main issues in the past Latvian election were: "Who is the most competent?" and "Who is the least corrupt?".

I hope this trend towards normalcy continues. I prefer to live in a world where proper enviromental standards for new housing developments are the most burning political issue, rather than in a world were Latvia has to worry about Russian military buildups. Of course, that depends on whether Russia is heading towards normalcy as well, and I am not sure of that at all...

An article on Livs/Livonians

In comments to my previous post, reader Ed points to an interesting Deutsche Welle article on Livs/Livonians, the nearly extinct indigenous ethnic group in Western Latvia.

The article says that the number of native speakers of Livonian is less than a dozen (even less than what I said in my previous post). But the younger people of Liv descent are trying to learn the language and keep it alive. I hope they succeed!

As a side note, I find it amusing that English uses the word "Livonian" for two entirely different things:

1. The indigenous ethnic group of Latvia;
2. The German knights who conquered the land of Livs/Livonians in the 13th century.

In Latvian, we distinguish the two by calling the first Livs and the second Livonians. In English, both the local people and their conquerors are Livonians! I was really surprised when I first saw that in Wikipedia three years ago.

Blue cows!

A friend from London told me he had seen an ad by Latvia tourism agency:

Two million reasons to visit Latvia
Reason #653,432: blue cows.

That started an interesting conversation. I think I managed to convince everyone that Latvia indeed has blue cows.

Latvian blue cows are farm animals, a peculiar variety of regular cows.


Traditionally, blue cows were grown by Livs, an indigenous ethnic group of Latvia which spoke a language related to Estonian and Finnish. Livs lived along the Baltic sea in the Latvian regions of Vidzeme and Kurzeme (Courland). An old legend says that blue cows used to live in the sea and would come out briefly before the sunrise to graze on the seaside grass. Then, once upon a time, The Mother of the Sea (Juras Mate) gave some of them as gifts, to families of Liv fishermen who had died in a storm.

Both Livs and blue cows became nearly extinct during the Soviet period. In case of Liv people, the Baltic Sea became the border between the Soviet Union and the West. Livs were uprooted from their fishermen villages, to make space for military. At the end of Soviet period, there were less than 100 people speaking Liv language.

Blue cows were almost completely displaced by other breeds. Less than 100 of them survived the Soviet period, too. In 1990s, Latvia, together with UN Food and Agriculture Organization, started an effort to preserve this peculiar variety of cows. As a result, blue cows can be still seen along the coast of Kurzeme (Western Latvia).

Latvian presidential election, two weeks later

The two weeks since Valdis Zatlers became the next Latvian president have been quite predictable:

• Zatlers has visited State Revenue Service, to settle the taxes on cash gifts that he, as a doctor, received from his patients. State Revenue Service has also called other doctors to pay taxes on their gifts. So far, only three other doctors have responded. Meanwhile, the public debate on appropriateness of those gifts is continuing at full speed.
• Shortly before the election, our current president Vaira Vike-Freiberga accused the ethnically-Russian party Saskanas Centrs of being disloyal to Latvia (my guess: she meant they are being funded by Putin's administration). Saskanas Centrs threatened to sue her for libel. Vike-Freiberga claimed that she has a classified information that Saskanas Centrs is disloyal and refused to make it public. We have not heard about a possible Saskanas Centrs lawsuit since then.
• The Delna organization that organized the anti-Zatlers demonstration near the Latvian parliament during the presidential vote is looking for donations. The demonstration of 500-1000 people had cost 20,000 euros to organize! Those protests are expensive...
• Someone has created an unofficial Zatlers homepage at valdiszatlers.com and offers to sell the domain to the highest bidder. The website contains three paragraphs on Zatlers and his picture. Amusingly, half of the text has been copied word-by-word from this post on my weblog.
• Social Democratic party is gathering signatures in support of a referendum that would change the Latvian constitution and make the president elected directly by people, rather than by the parliament. But now, after our parliament voted for the less popular of the two candidates two weeks ago, its chances of passing are higher than ever!
  

Index to my previous posts on the presidential election.

In the news

Latvian historian Heinrihs Strods has been denied Russian visa. He intended to visit Moscow to explore documents in Russian archives and to give a talk at a conference. Strods applied for visa several times, with support letters from the Latvian embassador to Russia and from a history institute of Russian Academy of Sciences and was repeatedly denied visa. This is a second instance when a well-known Latvian historian has been denied Russian visa. The first was Aivars Stranga in 2005.

This is quite outrageous. Apparently, in Putin's Russia, foreign historians are not allowed to do archive research unless Putin's government is sure that they'll interpret archive documents in desired way!

Found on the web

Riga Daily Photos. Some of the pictures are very nice!

Oil and the collapse of Soviet Empire

The fall of the Soviet Union in 1991 was preceded by a deep economic crisis during its last years. Until a few days ago, I wasn't sure why this crisis started in late 1980s and not earlier or later. The former Russian prime minister Yegor Gaidar says there was a good reason for that. The reason was oil.

During late 1970s and early 1980s, the oil prices were high and Soviet Union was making a lot of money by selling oil to Western nations. That allowed to buy food and other goods that the dysfunctional socialist economy of USSR could not produce in sufficient amounts. Then, in 1985, the oil prices plummeted. In half a year, they fall more than twice. And so did the oil revenues of the Soviet Union.

Soviet leader Mikhail Gorbachev desperately tried to reform the Soviet economy. But no reform, even the most perfect one, could compensate for sudden disappearance of most of oil revenues. Soviet Union had to borrow money to pay for food imports. By 1989, Western banks stopped lending money to Soviet Union, because they did not believe the country would be able to pay it back. At that point, the only loans that Soviets could get came from Western governments directly and those loans came with strings attached.

In 1990, Baltics declared independence. In January 1991, Soviet tanks attacked the TV tower in Vilnius, Lithuania. For next two weeks, Baltic states were tense. Will Soviets follow through and remove the pro-independence leadership of Baltics with military force? Nothing happened. According to Gaidar, Soviet Union had gotten the following message about Baltics:

Do as you wish, this is your country. You can choose any solution, but please forget about the $100 billion credit.

The goodwill of Mikhail Gorbachev may have played some role in Soviet Union not using military force, but the fear of not getting $100 billion credit sealed the deal.

Here is the full transcript of Gaidar's speech on this topic. He has also published a book, Gibel' Imperii: Uroki dlya sovremennoi Rossii [The Collapse of an Empire: Lessons for Modern Russia, with English translation available in two months] which I plan to read, once I get hold of it.

Oil prices are now high again and Russia is swimming in oil money, with $400 billion reserves for the case if the prices fall. Preventing Russia from using military power by threatening to withhold credits wouldn't work these days.

Posts on Latvian presidential election

This is the list of my posts on the recent presidential election in Latvia, for an easy access to them:

• Valdis Zatlers: facts, my opinion.
• Aivars Endzins: facts.
• Notes on the election campaign: March 27, March 29, opinion poll.
• Post-election thoughts: part 1, part 2, part 3.
• Estonian humour about the Latvian election.
  

Latvian presidential election, post scriptum

Some final thoughts on the presidential election:

1. Most intense election, ever. This was the most heated presidential election, since Latvia regained independence in 1991. The Latvian president is chosen by the parliament and, in previous 4 elections, people did not even try to influence the parliament. As a result, we got two presidents: Guntis Ulmanis (in 1993) and Vaira Vike-Freiberga (in 1999) who would not have won a popular vote at the time when they were first elected. (Vike-Freiberga eventually became very popular. But, when she was first elected, most Latvians only vaguely knew who she was.) And hardly anyone was objecting to that.
   
   This time was different. We had, for the first time, TV debates between the candidates. Numerous organizations expressed their opinions on candidates. Everyone had an opinion. And a lot of people were very disappointed, when the parliament chose a less popular coalition candidate (Valdis Zatlers) over a more popular opposition candidate (Aivars Endzins).


2. Zatlers is a puzzle. Our new president, Valdis Zatlers, was a complete unknown 9 days before the election. We still don't know his positions on many issues nor how independent he would be as the president. On the positive side, people who know him as a doctor say good things about Zatlers and it seems that our outgoing president Vaira Vike-Freiberga (whose judgement I trust) preferred him over the other candidate. On the negative side, a lot of people are very concerned by the way how Zatlers became coalition's candidate and whether he was chosen for loyalty more than for competence. (And this is a very soft way to word their concerns.)
   
   I hope Zatlers turns out fine! But depending on which article I read, my expectations about Zatlers go from cautiously optimistic to extremely worried and back.


3. Zatlers is a puzzle, even to those who selected him. If someone in the ruling 4-party coalition selected Zatlers in hope they could easily manipulate him, they have made a risky choice. With non-politician candidates like him, it's difficult to predict how they will behave after becoming the president. Recent Latvian history has previous examples of non-politicians ascending to top government positions in a lightning speed, like Zatlers. More than once, these people turned out to be much more independent and strong-willed than expected.
   
   The second way how this choice could backfire on the coalition is if Zatlers turns into a PR disaster that keeps saying the wrong things. In this case, they'll be stuck with him for the next 4 years and that will certainly affect the next parliamentary election. Again, if they had chosen someone who was a public figure before, it would be predictable how he will behave in the spotlight of the media. With Zatlers, it's not.

And the winner of Latvian presidential election is?

On his blog, Marko Mihkelson, an Estonian politician, says that the true winner is... Toomas Hendrik Ilves, the president of Estonia. Quote:

Now we can safely say that, after Vīķe-Freiberga leaving [the post of the Latvian president], Toomas Hendrik Ilves will become the most knowledgable leader in Baltics and, more broadly in Central and Eastern Europe. And maybe even in Scandinavia.

I essentially agree with that. I still hope our new president Zatlers turns out well. But he might not be a match for Ilves.

Mikhelson's remarks were quoted by several Latvian news websites and had an interesting effect on the readers (judging by the comments sections there). Valdis Zatlers was getting a lot of criticism. But, once the people read what Mikhelson said... they started to rally behind Zatlers. Nothing brings Latvians together as well as criticism from Estonia...

Latvia has a new president

Today, the Latvian parliament elected Valdis Zatlers as the next Latvian president. 9 days ago, Zatlers was a respected medical doctor and a complete political unknown. Then, he emerged as the compromise candidate of the four-party coalition government and, in July, he will take office as the next Latvian president.

Here are some of my past posts on Zatlers: The basic facts about him, and about the supposed scandal with Zatlers receiving undeclared payments from his patients. And, now, some quotes from people who know Zatlers (my translation from this Latvian-language source):

Bertrams Zarins, clinical professor, Harvard Medical School:

I have very positive opinion of Valdis Zatlers being the candidate for presidency. I have known him very well and for a very long time. Among others, he stands out as very capable, very well regarded and always patriotic. [...] I don't know about his knowledge of politics but I am sure he will learn everything quickly.

Nora Ikstena, Latvian writer:

Valdis Zatlers is a men with wonderful work experience who has saved many lives. From how he communicates, it is clear that he is ready to serve Latvia. [...] I have a gut feeling that, after going through all these political battles, Valdis Zatlers may develop into much more modern, democratic and charismatic president that Aivars Endzins [the other candidate] would be.

I hope they are right!

And, as a sign of Zatlers' victory, I'm changing the background colour of this blog to orange for the next 4 years... OK, this part is a joke.

Latvian presidential election: campaign notes

In 29 hours, the Latvian parliament will gather to vote on the next president of Latvia. There are two candidates: Valdis Zatlers and Aivars Endzins. The latest news from the election campaign:

1. The mudslinging continues! Instead of having a substantive debate on the issues, both campaigns are trying to find ethics flaws with the other candidate. People's Party (which supports Zatlers) has re-published fragments from a book that Aivars Endzins wrote 30 years ago, during the Soviet period. In this book, Endzins denies that Soviet Union ever occupied Latvia by military force and claims that Latvia had joined Soviet Union voluntarily. And there is more of Soviet propaganda in his book.
   
   My opinion of Endzins just took a big, big hit. I know that joining Communist Party was a pre-requisite for many careers in Soviet Union (particularly, careers that invoved managing other people). But, there is a difference between
   
   (a) joining Communist Party and doing the minimum required amount (e.g., paying some amount in membership fees and attending meetings once in a while) and
   
   (b) actively producing propaganda nonsense on behalf of the Communist regime.
   
   I can fully understand the first but I have much less understanding for the second. If a person in Soviet Union wanted to pursue a career that did not involve writing propaganda books, there were certainly options for that!
2. There might be yet another candidate! Egils Levits, a Latvian judge on the Court of Justice of European Communities, says that he has been informally contacted by politicians. It's possible that parties behind Zatlers and Endzins reach a deal on Levits as a compromise candidate before tomorrow's vote.

Tomorrow might be interesting. Stay tuned...

UPDATE (30/05/07): Endzins is trying to justify his past writings and comes off quite pathetically. The fellow historians are quite skeptical and say that one could work as an academic historian in Soviet Union without writing what Endzins wrote. Our current president, Vaira Vike-Freiberga also came down on Endzins quite hard, for both writing Soviet propoganda in 1970s and 1980s and for awarding bonuses to himself as the Chairman of the Constitutional Court. She was even harsher about the "Saskanas Centrs" (Harmony Centre) party which nominated Endzins:

About their funding, I, as a president, have certain confidential information that makes me worried about their loyalty to Latvia.

I read this as a hint that Harmony Centre is getting money from Russian government, through some secret channels. Vaira Vike-Freiberga did not endorse any of the candidates but she was much softer about Zatlers' supposed ethics lapses and characterized them as understandable.

Opinion poll

The Latvian president is elected by the parliament, but the public opinion can have an effect on how the parliament votes. Latvijas Fakti asked 500 Latvians, whom do they support for president?
54.3% Aivars Endzins
28.6% Valdis Zatlers
Among Latvian webloggers, it's even much more skewed towards Endzins. Peteris, Aleks and a lot of Latvian language webloggers support Endzins and I have difficulty finding any pro-Zatlers voices.

Zatlers vs. Endzins: issues and non-issues

With 4 days left until the Latvian presidential election, the candidates are finally known! It's Zatlers (nominated by governing coalition 9 days before the election) vs. Endzins (nominated by opposition 7 days before the election).

Now, Latvia is having a short but heated debate on the two candidates. In case of Zatlers, the debate has concentrated on cash "gifts" that he, as a doctor, has received from pacients (whether those gifts have been legal and whether the taxes on them have been paid). In my opinion, this issue is getting too much attention. The "gifts" from patients are common in Latvia. (They should not be but, in practice, they are...) If we disqualify candidates who have received them, we might have to disqualify every surgeon and specialty doctor in Latvia! (State revenue service, when asked to comment on Zatlers: "We are trying to check if there is any doctor in Latvia who has declared any of his gifts to the tax service...")

The coalition parties are trying to spark an equally meaningless debate on Endzins' past membership in Communist Party. Again, if the same standard is applied to every candidate for every government position, it would disqualify a large fraction of politically active people who were old enough to be admitted to Communist Party in Soviet period.

The main problem with Zatlers is not any of his gifts. The problem with him is that Zatlers was nominated by People's Party-lead coalition, which viewed as somewhat corrupt. The gifts are just an excuse to bring his candidacy down. If there was another People's Party-related candidate, the opposition would find a different excuse!

Similarly, the problem that the coalition has with Endzins is that he is too close to the opposition and too far from the coalition. So, the coalition would like to bring him down and they haven't found any other issue except for Communist Party membership.

I am a bit disappointed those "excuses" getting so much attention. Can we start talking about the real issues? When it comes to corruption, possible influence of personal business interests of Andris Skele on Latvian government decisions is a major issue. Zatlers' cash gifts are non-issue.

My previous posts on presidential election:

• Endzins: profile.
• Zatlers: facts, my opinion.
• Candidates who have now withdrawn: part 1, part 2, part 3, part 4.

Latvian presidential election: the stage is set!

Yesterday was the deadline for nominating candidates for the Latvian presidential election on May 31. And on the last day, we got another candidate!

Harmony Centre, a left-of-center party consisting mostly of ethnic-Russians, made a surprise move by nominating Aivars Endzins, the former Chairman of Constitutional Court of Latvia. On the evening of the same day, New Era Party's candidate Sandra Kalniete withdraw her candidacy in favour of Endzins, during the TV debate between the candidates. According to Kalniete, she made her decision during the debate, seeing that Endzins was the best candidate.

The cynic in me says that Kalniete's withdrawal was planned in advance and carried out in a way that would get the maximum positive publicity for Endzins. If so, New Era Party has proven that they are much better in staging events of this type than the coalition parties.

Who is Aivars Endzins? We know much more about him than Zatlers. Born in 1940, taught law at the University of Latvia for most of the Soviet period. Joined pro-independence Popular Front of Latvia in 1988. Unlike Kalniete, he was not among the top leaders of Popular Fronte, but he was quite active and was elected to the Latvian parliament in 1990 and re-elected in 1993 and 1995. In December 1996, he was appointed to lead the newly created Constitutional Court of Latvia. At this time, he resigned from both parliament and Latvian Way party to which he belonged at this point, so that he could become a politically neutral judge.

In last years, Endzins has spoken out against the top members of Latvian political elite on several occasions. Probably, the most prominent occasion was the Motte apartment case, in which a government real-estate management agency lead by Janis Motte handed out 183 government apartments in very good locations to members of political elite and their friends. The Constitutional Court reviewed the case and decided that the rules according to which the agency was run were illegal. According to Endzins, they were pressured not to consider the case by a number of politicians, including two prime ministers: Andris Skele and Vilis Kristopans.

On another occasion, Endzins spoke out against Imants Freibergs, the husband of our current president Vaira Vike-Freiberga. Freibergs family has acquired a long-term lease for land in a highly lucrative location in the resort town of Jurmala and wanted to build a house there. The problem was that the land was classified as a nature reserve and housing construction on it was prohibited! Imants Freibergs started working with Jurmala city council to remove his lot from the list of nature reserve so that he could build there. (They don't normally do that but if the lot belongs to a highly influential politician or businessman... the rules can change.) Endzins criticized that and suggested that Freibergs gives up the lease to the land.

So, if Endzins sees something wrong, he'll say that, even if the wrongdoers are high up in the government! His foreign policy abilities are unknown... but he has certainly communicated with foreign politicians and judges while being in the parliament (1990-1996) and Constitutional Court (1996-2006). So, he should be fine in that aspect. (If you think that's a a bit mellow endorsement of Endzins... yes, it is! I still wish Kalniete was a candidate.)

UPDATE: In comments, Pēteris Cedriņš corrects me and points out that Endzins has quite a bit of foreign policy experience:

he led the Latvian delegation to the OSCE Parliamentary Assembly, was a member of the Latvian delegation to PACE, and has worked on the Venice Commission (the European Commission for Democracy through Law) and in the Baltic Assembly.

My previous posts on other presidential candidates:

• Zatlers: facts, my opinion.
• Candidates who have now withdrawn: part 1, part 2, part 3, part 4.

One last note on Zatlers

I'm amazed how quickly Google indexes the web! Another Latvian weblogger wrote a post on Zatlers today and, just a few hours later, when I was googling for information, that post was already among the search results! Shouldn't be too long until my posts on Zatlers start showing up on Google...

Dark horses in Latvian politics

Valdis Zatlers is not the first surprise candidate for a top political position in Latvia. Vaira Vike-Freiberga was only vaguely known for most Latvians, before she became the president in 1999. And I didn't know who Andris Skele was when he was chosen as the prime minister in 1995, after a deadlock in two-month long negotiations.

In both of those cases, the Latvian politicians chose a barely known person who did not belong to any political party. And in both cases, that person turned out to be more strong-willed than most of Latvian career politicians. Both Vike-Freiberga and Skele had a profound impact on Latvian politics, much more than it was expected when they were nominated.

I wonder if there is something deeper behind that. A weak person is less likely to become known outside of his/her own field. This may be why outsiders who ascend to top government positions in Latvia turn out to be stronger and more independent than the career politicians.

Curiously, people who know Zatlers describe him as a person of strong character. Will the parties who nominate him now be happy with him four years later? Or will they see him going in a direction that they didn't expect? As we see from the past, being dark horse does not imply being push-over.

Dark horse presidential candidate has emerged!

Earlier today, the four parties of the Latvian coalition government agreed on the doctor Valdis Zatlers as their presidential candidate. Since the four-party coalition has 58 of 100 seats in the parliament, Zatlers will become the president, unless one of parties changes their mind between now and May 31 (the election day).

My reaction, six hours ago... They nominated whom? I've heard that name but when and in that context? Let's look him up on the google. 8 pages of hits, mostly medical webpages, one newspaper interview. Hmmm, not much information...

The basic facts. Born in 1955, received a medical degree in 1979, has worked as a doctor since then. Has been the director of Riga Hospital of Traumotology and Orthopaedics since 1994. Participiated in founding Latvian Popular Front, the pro-independence coalition, in 1988, but did not stay in politics. Founded several professional organizations of Latvian doctors around the same time.

After that, the only time when he came into news, was a scandal in early 2003. A doctor from his hospital, Aris Auders, had gone into politics with New Era Party and became the Minister of Healthcare. One of Auders' first decisions as the minister was starting a corruption investigation against his former boss Zatlers and suspending Zatlers for the duration of the investigation. That was the time when New Era Party had just entered the government after campaigning on anti-corruption theme and was starting investigations against many officials.

In this case, Zatlers was cleared of all charges one month later. And the investigation against him was overshadowed by a scandal involving Auders himself. Auders became the symbol of medical corruption in Latvia and the investigation against Zatlers was forgotten by the general public.

Will he be a good president? It's very hard to say. Zatlers is probably very respected as a doctor but has almost no political experience. One negative is that he might suffer from "foot-in-mouth" disease. Diena newspaper has dug up some past quotes from Zatlers' interviews and they are quite colourful. Like this one:

People who published the anti-Mohammad cartoons had a complete freedom do to that. But they should have realized that those who pray to Mohammad, have a complete freedom to kill them for that.

And it's not the only one. Zatlers will have to become more careful if he's elected.

My other posts on Latvian presidential election:

• On Aivars Endzins;
• Will Zatlers be anyone's puppet?Notes on election campaign: March 27, March 29, after-election.

Inflation in Latvia

Inflation has become one of main political issues in Latvia. Year-to-year increase of consumer price index is now at 8.8%, highest in the European Union. Introduction of euro has been postponed indefinitely. Bank of Latvia has raised its interest rates and the parliament has passed an anti-inflation package of tax changes and other measures.

I suspect the effect of those measures will be quite limited and not because the Latvian government does not want lower inflation. In 1960s, Canadian economist Robert Mundell came up with an economic model of small open economies, for which (together with other achievements) he would win Nobel Prize in Economics in 1999. A consequence of Mundell's work is that a country cannot simulteneously have the following three things (known as "Impossible trinity"):

• A fixed exchange rate;
• Free capital movement;
• An independent monetary policy.

Canada (Mundell's homeland) has capital moving freely between it and United States (in 1960s) and it and the rest of world (now) but the exchange rate between Canadian and US dollar is not fixed. It has fluctuated widely, from 65 Canadian cents for one US dollars to 90 Canadian cents for one US dollar, in just last 5 years. As a result, the Bank of Canada is able to set its monetary policy independently of United States.

Latvia has made a different choice. The money is moving freely between it and the rest of EU and beyond and the exchange rate between the Latvian lat and the euro is fixed. That's the first and the second of three conditions of Mundell's "impossible trinity". So, we can't have the third.

Latvia's monetary policy is effectively in hands of European Central Bank, instead of Latvian authorities. Bank of Latvia can change the interest rates for loans in lats, but if those get to high, everyone will start borrowing in euros. (That is, everyone who is not already borrowing in euros...) And if the current policies of European Central Bank result in high inflation in Latvia, there's not much Latvia can do... It's not a satisfying answer but I'm afraid it's true...

More presidential candidates

Latvia First Party/Latvian Way coalition has nominated the deputy speaker of the Latvian parliament, Karina Petersone (born 1954) as its presidential candidate. Petersone has been in Latvian politics for 16 years but not in high-profile positions. She started in early 1990s as an aide to Anatolijs Gorbunovs, then-speaker of the parliament and then gradually moved into more significant roles, serving as the minister of culture from 1998 to 2002 and the deputy speaker of the parliament from 2006 to now. She has a reputation of a careful politician capable of compromises and political manuevring but hardly ever takes a leading role on important questions.

Her main negative is the lack of foreign policy experience. Latvian presidents usually have a significant foreign policy role and the outgoing president, Vaira Vike-Freiberga was very good at that. Petersone will have to learn foreign policy on the spot, if she is elected. She might be able to do that, but I would prefer someone who already has experience.

Social Democrats have nominated Dainis Ivans (born 1955), a prominent independence activist of late 1980s/early 1990s. Since Social Democrats have no seats in the current Latvian parliament, it is unlikely that Ivans will become the president. I interpret his nomination as Social Democrats trying to gain positive publicity by nominating a popular candidate.

Ivans started his political career as a journalist and enviromental activist, opposing the construction of more dams on Daugava river in late 1980s. This brought together enviromentalists who opposed the destruction of landscapes and nationalists who were opposed to the possible influx of a large number of ethnically Russian construction workers. The construction project was shelved and Ivans would go on to become the leader of Latvian Popular Front, the pro-Latvian independence political coalition.

He was outstanding as a protest figure but did not fare so well after Popular Front winning the election and become the ruling party. Protesting things and making positive contributions from a position of power requires different sets of skills and I suspect Ivans had skills for the first but not the second. I've also read multiple rumours of his personal life improprieties in Latvian tabloid press. Given those reasons, I would prefer not to see Ivans as the president.

On a second thought, his rhetorical skills may be good for promoting Latvian causes abroad. Still, I prefer almost any other candidate.

Still waiting for candidates from Union of Farmers and Greens and Fatherland and Freedom.

Latvian presidential candidates, update 2

With so many candidates from the previous shortlist no longer running, who is on the candidate list now? Parties in the parliament have nominated some previously unknown candidates.

Tautas Partija (People's Party) has nominated Maris Riekstins (born 1963) who is currently the Chief of Staff of Prime Minister Aigars Kalvitis.

Foreign policy experience? Check. Riekstins was the secretary of the state (the highest civil service position) in the Ministry of Foreign Affairs for 11 years and then he was the Latvian embassador to US for two years.

Undesirably close links to powerful Latvians with a lot of money? Unclear. Latvian-language blogger Maris Zanders says that Riekstins' candidacy was pushed through by Andris Skele, the multimillionaire businessman who founded People's Party but no longer has an official position there. I'm not privy to inner workings of People's Party but let's have a look at Riekstins' resume... He became the secretary of state for MFA in 1993, years before Skele became influential in Latvian politics and he lasted in that position for 11 years, most of which the government was not run by the People's Party. Does not look like a protege of Skele at all... And he joined People's Party just a few months ago.

Political views? Unknown, since he has been a civil servant and a diplomat, rather than a politician.

Overall? Not a well-known figure but I don't see anything that obviously makes him a bad candidate.

Latvian presidency candidates: update 1

Eight months ago, I wrote about a supposed shortlist of seven candidates for the Latvian presidency that was behind discussed behind the scenes. With one month left until the election, there is not much left of that shortlist:

• Sandra Kalniete: New Era Party is fully behind her. The bad news is that nobody else in the Latvian parliament likes New Era Party. Unless our current president dissolves the parliament between now and the election (given the confrontation between the president and the parliament over last few months, this is clearly a possibility) and there is a new parliament electing the next president, Kalniete is not going to win.
• Andris Piebalgs: claims that he is not running. Prefers to stay in European Commision instead.
• Ojars Kalnins: still on the list but is rumored to be closer to the end of it. His supposed disadvantages: fatigue with Latvians from abroad being in key decisionmaking positions and he might be easy to manipulate for political parties. Hmmm... I don't want a president who is manipulated by others, but wouldn't that actually increase his chances with parties in parliament? After the recent confrontation with Vaira Vike-Freiberga, they might like it!
• Ivars Lacis: was offered a nomination by The Union of Farmers and Greens and he declined. One more candidate whom I liked is off the list.
• Artis Pabriks: declined, after an analysis of his chances to gain a majority support in the parliament. Expressed discontent with the lack of transparency in the election process. Why are all candidates whom I like running away from being the candidates??
• Janis Jurkans: I was very surprised by seeing his name on that shortlist eight months ago! I haven't heard about him running again...
• Zaneta Ozolina: claims that she is not running and has not even been offered to run by any of the parties. I hope so. Eight months ago, she was an unknown. Over the last months, she has been more actively speaking in public and I don't see enough competency in her speeches. (The main gain from Latvia being in EU is being able to participiate in decision-making?? What?? Have we affected any significant EU decisions at all in the last three years??) Also, she was teaching "scientific communism" at a university during the Soviet era... former propaganda worker for the Soviet regime as a president is the last thing Latvia needs.

Riots in Estonia

One week late... this is my perspective on what happened in Estonia. In terms of facts, I don't have much to add to what Aleks and Justin wrote.

Why did this happen in Estonia and not Latvia? There are a few curious stories that I've read over the past months. The first was in Nedela (The Week), a Latvian newsmagazine, last December. A certain pro-Russia activist organization was planning to organize a "conference" in Riga on World War II and Latvian history. Given the organizers, the conference would have been a sequence of speeches proclaiming the positive role of Soviet Union, denying that Latvia was ever forced to join the Soviet Union, downplaying the extend of Stalinist crimes against humanity... They got a phone call from Russian embassy in Latvia asking them to cancel the conference.

The next story came in March. March 16 is a date when the Latvian legion of SS was founded in 1943 and it usually results in a number of marches and counter marches in Riga, by older veterans who were part of Latvian legion, by younger Latvian nationalists (a lot of them from quite dubious nationalist organizations) who want to honour the Latvian legion and by Russian groups who hate the legion and try to obstruct the march, proclaiming that "freedom of speech does not apply to Nazis". In past years, things have gotten quite confrontational, to the degree that Riga City Council deliberately scheduled repair work in the city centre in March 2006, to push the marchers away to more remote locations.

This year, there was a new twist! A few phone calls from Russian embassy to "anti-Nazi" groups asking not to get "too unruly" with their "counter-march" because Russia did not want to inflame tensions in Latvia. The organizers were hinted that, if they disobey the orders, they might run into some dificulty getting Russian vizas next time when they go to Russia.

If Moscow wanted to stir up tensions in Latvia, they could easily find an excuse... but they seem to be working in the opposite direction! Why are they interested in confrontation in Estonia but not Latvia? I wish I could understand the logic of Moscow puppetmasters...

So many things to write about....

My blog has been dormant since November. Back then, the parliamentary election was just over, Latvia had a new government and I thought it was going to be an uneventful time there... So, I stopped writing and focused on my work and other pursuits.

I was wrong! The last few months in Latvian politics have been among the most intense in the recent history. The president Vaira Vike-Freiberga confronting the parliament and initiating a referendum via Article 72 of Latvian constitution, which has never been used in that way (in 27 years that Latvia has been a democracy with the present constitution). One of 10 richest people (and, formerly, a kingmaker of Latvian politics), Aivars Lembergs, is behind the bars, accused in money laundering. Juris Hlevickis, who tried to buy his way towards becoming mayor of resort city Jurmala and came one vote short, is convicted. And, just a few days ago, our neighbor Estonia erupted in riots of the scale it has not seen for at least a decade...

Over the next days, I'll cover some of those events. First, later tonight or tomorrow, on riots in Estonia. Then, the upcoming presidential election and corruption scandals. On some of those, I might write two posts. One, describing the conventional wisdom dominating the Latvian media. And, then, the second, with the facts that don't fit together with the conventional wisdom.

Republic of Latvia - 88

From the song we were singing on this Independence Day in the Latvian Centre in Toronto:

Tev muzam dzivot, Latvija,
Ka saulei, kas mirdz debess klaja!
Tu - jauna zvaigzne zvaigznaja,
Kas nule uzlekusi taja.

My amateurish translation:

You forever live, Latvia
As the sun shining in the sky!
You - a new star in the constellation
Who has just risen over there.

Preliminary election results

With 970 of 1006 precints reporting:
Tautas Partija 19.52%
Zaļo un Zemnieku savienība 16.81%
Jaunais laiks 16.12%
"Saskaņas Centrs" 14.10%
LPP/LC 8.53%
"Tēvzemei un Brīvībai"/LNNK 6.80%
PCTVL 5.85%
From region-by-region results and my Excel spreadsheet, here are the projected numbers of seats in the parliament:
Tautas Partija 23
Zaļo un Zemnieku savienība 18
Jaunais laiks 18
"Saskaņas Centrs" 18
LPP/LC 10
"Tēvzemei un Brīvībai"/LNNK 7
PCTVL 6
As usual, the region-by-region formula distorts the vote proportions a bit. The numbers are nearly final (98-100% vote counted) for all regions except Riga. Riga results may shift by a seat or two. The most likely possibility is Jaunais Laiks gaining one more seat, either from "Tēvzemei un Brīvībai"/LNNK or Saskanas Centrs.

The current TP+ZZS+LPP/LC coalition is currently at 51 seats (out of 100) and this total is unlikely to change. Will Kalvitis be the first prime minister (since 1990) who keeps his position after the election?

UPDATE (10:25pm): Diena has a different projection, with 1 more seat for ZZS and TB/LNNK and 2 less for Saskanas Centrs. I checked my calculations but did not find any mistake.

Meanwhile, the only uncounted votes left are from abroad (including mine!). The projected seat totals have not changed. The abroad votes are credited to Riga region and can still result in Jaunais Laiks gaining a seat there.

Final opinion poll

From Latvijas Fakti, polling conducted on October 2-4, change compared to the previous week:
Tautas Partija 13.7% (+1.1)
ZZS 12.4% (+0.1)
Jaunais Laiks 9.5% (+2.4)
PCTVL 9.4% (+0.8)
Saskanas Centrs 8.9% (+3.2)
LPP/LC 6.8% (+0.9)
TB/LNNK 5.1% (-0.7)
Social Democrats 3.9% (+0.4)

Social Democrats are almost exactly on the 5% borderline. (3.9% of all polled people corresponds to 5% of those who have chosen a party to vote for.)
Projected seats in the parliament:
Tautas Partija 20 (-2)
ZZS 18 (-3)
Jaunais Laiks 14 (+2)
PCTVL 13 (-2)
Saskanas Centrs 13 (+3)
LPP/LC 10 (unch.)
TB/LNNK 7 (-3)
Social Democrats 5 (+5)

Looks like four more years of divided parliament, with at least three different government coalitions in this time. As it has been since the independence.

Opinion piece in Monday's Diena

Monday's Diena newspaper had an opinion article by Peteris Strautins in which he expresses worries similar to my Saturday's post, but in much more outspoken form. The article is now in the subscription-only archive but here is a quote:

Ja finanšu tirgi neceretu, ka Latvija parskatama nakotne tomer pievienosies eiro, mes savu riskanto ekonomikas raditaju del jau sen butu piedzivojuši kapitala begšanu. Virkne Latvijas ekonomikas arejo indikatoru ir krietni sliktaki neka Austrumazijas valstis pirms 1997.gada lielas finanšu krizes. Krizes skartajas valstis tekoša konta deficits videji bija 5% no IK, ka jau teikts, Latvija tas patlaban ir 18%. Varbut psihologisko luzumu radis 20% robežas parsniegšana?

If financial markets did not hope that Latvia would join euro in foreseeable future, we would have experienced capital flight long ago, due to our risky economy. Several of Latvia's external economic indicators are much worse than in East Asian countries before the big financial crisis of 1997. In the affected countries, the current account deficit before the crisis was, on average, 5% of GDP. As I already said, it's now 18% in Latvia. Maybe, there will be a psychological breakpoint after the deficit exceeds 20%?

The world is not very interested

about next week's Latvian parliamentary election. Only 8 foreign journalists have been accredited by Central Election Committee so far.

Latvia's economy: good news and bad news

Some economic numbers. First, Latvian economy grew 12.4% in the first half of 2006 (compared to the first half of 2005). This makes Latvia one of fastest-growing economies in the world and, according to International Monetary Fund (IMF), Latvia no longer has the lowest income in the EU. Now, Poland is the last and Latvia is second to last.

The growing economy has generated more money for the Latvian government and the ongoing election campaign is full of promises to use this money to increase salaries, retirement benefits and to reduce taxes, so that everyone benefits.

The Bank of Latvia is, however, warning of "unwelcome macroeconomic imbalances". And today's "Diena" has two one-paragraph stories (hidden on page 3) which make me think that this warning is a major understatement. First, according to Bank of Latvia, the foreign debt of Latvia has reached 10.583 billion lats (about 21 billion US $). That's about 110% of Latvia's annual economic output (GDP). Most of the debt is owed by Latvian individuals and companies. Government debt is only 639 million, the remaining 9.956 billion are privately owed.

Second, Latvia keeps borrowing at an alarming rate. Latvia's current account deficit reached 17.9% of GDP in the 2nd quarter of 2006. That means that 17.9% of economic activity in Latvia was financed by money that is either borrowed or invested from abroad (mostly borrowed, I think). I am not an economist (my knowledge of economy is mainly due to reading Dienas Biznesss and other financial newspapers) but these numbers look scary to me. There is no way how foreign banks will keep lending money to Latvia at this rate. Bank of Latvia website has an article which compares the present Latvia to Czech Republic which had a three-year economic slowdown in late 1990s, after the current account deficit reaching 7% of GDP in 1997. Latvia's deficit is already much larger than that, which suggests that the consequences may be more severe as well. (Again, I am not an economist, this is mainly my numerical common sense considerations.)

I am trying to follow the ongoing crisis in Hungary, to see if there are any analogies. The Hungarian prime minister just admitted that he has been "lying about economy day and night for past two years" to get reelected and announced an unprecedented austerity program, with salary cuts and massive layoffs of government employees. I talked to a Hungarian colleague (who currently lives outside Hungary) yesterday. He was unhappy and told me about Socialist vs. Fidesz political dynamics of Hungary. I was, however, more interested in the causes of economic troubles rather than the current political crisis and he was not able to tell much about that. It is also difficult to find good sources about the Hungarian situation on the web. (Again, it's because I am more interested in the economic analysis, rather than pictures of street riots.)

My main question is: what does this all mean for Latvia? Edward Hugh, an economist and one of bloggers at the Fistful of Euros, comments: "Baltic states look to be problematic but not today and tomorrow". One can either be worried by the first part or consoled by the second part. I am more in the first category but I hope I am wrong...

Two new opinion polls

Latvijas Fakti poll from September 23 to 26 (the number in brackets is the change compared to last week):
Tautas Partija 12.6% (-0.7%)
ZZS 12.3% (+0.2%)
PCTVL 8.8% (-0.4%)
Jaunais Laiks 7.1% (-1.0%)
LPP/LC 5.9% (-0.4%)
TB/LNNK 5.8% (unch.)
Saskanas Centrs 5.7% (unch.)
Social Democrats 3.5% (+0.2%)

Projected seats in the parliament:
Tautas Partija 22 (unch.)
ZZS 21 (+1)
PCTVL 15 (unch.)
Jaunais Laiks 12 (-3)
LPP/LC 10 (unch.)
TB/LNNK 10 (+1)
Saskanas Centrs 10 (+1)

Jaunais Laiks decline is now completely confirmed. And a poll by the competing company, SKDS. (Unofficial numbers, leaked to media. Have nonsense allegations by Dzimtene had so much effect on polling companies?)
ZZS 14.8% (+3.6%)
Jaunais Laiks 9.5% (-2.5%)
Tautas Partija 9.5% (+0.6%)
PCTVL 8.1% (-1.2%)
TB/LNNK 5% (-1.0%)
Saskanas Centrs 3.8% (+1.3%)
Social Democrats 3.5% (-0.3%)
LPP/LC 3.1% (-0.4%)

Good news

During meeting with Vaira Vike-Freiberga, Canadian prime minister Stephen Harper said that Latvia is close to satisfying Canada's requirements for allowing Latvians to travel to Canada without a visa.

Excellent! My experience is that Canadian consulates are generally more reasonable than US consulates (this story is one example and I know others). Still, applications for Canadian visas are only processed in Warsaw (not Riga) and mailing a passport to Poland can be time-consuming. Hopefully, we will no longer have to do that in a few years. If only United States could follow Canada in this ....

UPDATE: Estonians are one step ahead. They can already travel to Canada without visa.

New Estonian president

Toomas Hendrik Ilves has been elected as the president of Estonia. He was born in Sweden, in a family of Estonian refugees who left Estonia, escaping from the Soviet regime. He then grew up in USA and returned to Estonia in early 1990s, after it regained independence.

Close to 10% of population of Baltic states became refugees in 1944 and 1945. My father's family, small farmers from Central Latvia, nearly left the country as well, but they changed their mind a few hours before boarding a ship for Sweden. Some of the former refugees and their children came back in 1990s and some of them are very influential in the local politics. All three of the current Baltic presidents (Ilves, Vaira Vike-Freiberga and Valdas Adamkus) are former refugees.

I expect Ilves will be a very good president for Estonia. In Estonian and Latvian political system, the president's main role is to represent the country abroad. (The domestic political power belongs to the prime minister.) After living abroad for 40 years, Ilves knows the world outside Estonia very well. And he did well as the minister of foreign affairs for Estonia in 1990s. During the last years, Vaira Vike-Freiberga was the most internationally active president in the Baltic states and the unofficial spokesperson for the region. In a few months, this role will likely pass to Ilves. (Of course, it depends on whom the Latvians elect as Vike-Freiberga's successor. But how many of our candidates can match Ilves?)

Estonia has a fairly unusual (read: bizarre) election system. First, the parliament votes. If a candidate gets a 2/3 supermajority in the parliament, he/she is elected. (That has never happened so far.) Otherwise, the election goes to the Electoral College, which is composed of all the members of parliament and one representative from each municipal government. (Yes, Tallinn (population 400,000) and Ruhnu (known in Latvian as Ronu sala, population less than 100) both have one representative each. As a result, Electoral College is completely controlled by rural Estonia.)

This system was put in place in early 1990s. I was told that it was designed to prevent a specific person, the ex-communist Arnold Ruutel, from winning the presidency. The designers of the system thought that Ruutel could win a majority in the parliament but not in the Electoral College. That was a miscalculation. In 2001, Ruutel won the Electoral College. (It's amusing to watch how those tricks with electoral system can backfire... Ruutel might have lost a simple majority vote in the parliament in 2001.)

The election went to the Electoral College this time, as well. For a while, Estonian media were trying to guess which members of College will vote which way. Both Ilves and Ruutel camps claimed they had a majority of the Electoral College on their side. At the end, Ilves won, 174-162.

September opinion poll

My previous post on August opinion poll attracted some interesting comments from a professional survey statistician. Briefly, 9.5% in an opinion poll which polls 1000 people corresponds to a confidence interval [7.7%, 11.3%]. As a result, 1.3% change in Jaunais Laiks rating (from 10.8% in July to 9.5% in August) is not statistically significant to make any conclusions, although 2.2% drop from June to August might have been significant enough.

Meanwhile, Latvijas Fakti have released their September poll. Jaunais Laiks has dropped a little bit more, which confirms that the drop in August poll was not a statistical error. The numbers are:
Tautas Partija 13.3% (+3.5%)
ZZS 12.1% (+0.6%)
PCTVL 9.2% (-1.2%)
Jaunais Laiks 9.2% (-0.3%)
LPP/LC 6.3% (+1.2%)
TB/LNNK 5.8% (-0.8%)
Saskanas Centrs 5.7% (+1.0%)
Social Democrats 3.3% (-0.5%)

Projected seats in the parliament:
Tautas Partija 22 (+6)
ZZS 20 (+1)
PCTVL 15 (-2)
Jaunais Laiks 15 (unchanged)
LPP/LC 10 (+2)
TB/LNNK 9 (-2)
Saskanas Centrs 9 (+1)
Social Democrats 0 (-6)

The change is compared to August poll.

For the first time, the current minority government (TP+ZZS+LPP/LC) is projected to win more than a half of seats (52 out of 100), contrary to the Eastern European trend of voting out the government at every election. But I still think that "let's vote this corrupt government out" mood is going to prevail, once again. But who is going to benefit from it? Jaunais Laiks is no longer the anti-corruption outsider party and Social Democrats have their share of scandals from 2001-2005 Riga city government. Senior Citizen Party? They are still at 1.4% in the opinion poll but who knows...

It's official:Vaira Vike-Freiberga is running for UN Secretary General

Yesterday, the three Baltic nations nominated Vaira Vike-Freiberga for the UN Secretary General. She has been discussed as a candidate since at least March. Now, it's official. The biggest problem for her might be Russia's veto power. Russian media have already characterized Vike-Freiberga as "completely unacceptable" to Russia (because of her outspoken advocacy of Latvian interests, which are often in conflict with what Russia wants).

Latvian presidency candidates

No later than in June 2007, Latvia will elect its new president. The constitution does not allow our current president, Vaira Vike-Freiberga, to run for another term and, no matter how much Latvians value Vike-Freiberga, we will not change the constitution for her. Today, New Era party announced Sandra Kalniete as its candidate for the next president. Officially, she is the first candidate.

Unofficially, 6-7 other candidates are discussed. Last week, I read an interview by Martins Bondars, a long-time aide to Vaira Vike-Freiberga. The Latvian president is elected by the parliament and the behind-the-scenes consultations about candidates are going on. The 7 leading candidates mentioned by Bondars are:

• Sandra Kalniete (1953) - one of leaders of Latvian independence movement in late 1980s, then embassador to several countries, then the minister for foreign affairs from 2002 to 2004.
• Andris Piebalgs (1957) - a slightly lower-profile member of the independence movement who also became an embassador and is now the Energy Commisionar for the European Commision.
• Ojars Kalnins (1949) - Latvian American activist, Latvia's embassador to US from 1993 to 1999, now leads the Latvian Institute, an organization devoted to promoting Latvia's image abroad. (Curious fact: the previous head of Latvian Institute was Vaira Vike-Freiberga, prior to her being elected as the president.)
• Ivars Lacis (1949) - professor of physics, the current rector (chancellor) of University of Latvia.
• Artis Pabriks (1966) - originally political scientist with Ph.D. from University of Aarhus (Denmark), currently the minister of foreign affairs of Latvia.
• Janis Jurkans (1946) - the first minister of foreign affairs for Latvia. Has recently claimed that he plans to quit politics.
• Zaneta Ozolina (1957) - political scientist, aide to Vaira Vike-Freiberga.

The shortlist is of surprisingly high quality (compared to say, candidates nominated by various parties in 1999). I would be happy with any of the first five candidates. I would not like to have Jurkans as the president, though, despite myself having voted for him in parliamentary election once. I know nearly nothing about Ozolina.

Sandra Kalniete belongs to Jaunais Laiks (New Era) party. Artis Pabriks belongs to Tautas Partija (People's Party). Janis Jurkans belongs (or used to belong) to Tautas Saskanas Partija (People's Harmony party). The rest of candidates are non-partisan and have no obvious links to a particular political party. In Latvian politics, that may actually be an advantage. If the next parliament is as fractured as this one, the candidate will need support from at least 3 different parties to win. And many political parties may find it easier to support a neutral candidate than someone from another party. (Particularly, if it's a party they are not on good terms with. Sandra Kalniete may have hurt her chances by joining New Era a few months ago.) That is how Vaira Vike-Freiberga was elected in 1999. Almost no one was voting for another party's candidate and then she emerged as a neutral figure who could draw support from 3 parties.

August opinion poll comments

First, the numbers are unofficial. Latvijas Fakti decided not to release them. This has some bizarre pre-history. A few weeks ago, Dzimtene party claimed that their true popularity is about 10 times higher than in Latvijas Fakti polls (11% instead of 1.2%) and asked the Latvian anti-corruption office to investigate Latvijas Fakti. Dzimtene is a moderately obscure party which recently attracted attention by nominating Vadim Putin (who has similar name but is not related to Russian president Vladimir Putin) as a candidate to Latvian parliament. That smelled like a publicity stunt and Dzimtene's claim about opinions polls being wrong has a similar smell. Some of people involved in Dzimtene have a history of such stunts and there is nothing surprising here. Nothing, except for the reaction of Latvijas Fakti. They said they are tired of people questioning their polls and decided not to release the most recent poll. (I wonder if that means that some more influential party is unhappy as well... Dzimtene is too obscure to merit such strong reaction.) Their decision was a pity because I respect Latvijas Fakti and their numbers. But, a few days later, newspapers got hold of the numbers and, now, everyone knows them.

Second, the big story is Jaunais Laiks (New Era) falling from the first place in July to the fourth place in August. Neatkariga Rita Avize (NRA), a newspaper hostile to New Era, credits the fall to their publication of transcripts of phone conversations between a businessmen who was being investigated by the tax service and senior New Era members. The businessmen was seeking for a help against the investigation and he was getting somewhat symphatetic response from New Era people. New Era Party has the same opinion about the reasons why they fall to the fourth place in the opinion poll, except that they call it as a "smear campaign by NRA".

I think they both may be reading too much into a small change in polls. New Era numbers have declined only by 1.3%. For a poll of 1000 people, that's 13 people and the probability of polling company accidentially choosing 13 less supporters of New Era this time is not the small. According to a calculation by this blogger, the probability of such event is 5-10%, meaning that New Era numbers would get underestimated by 1.3% once every 10-20 months. As long as there isn't another opinion poll confirming the change, it may just be random noise in data.

August opinion poll

From Latvijas Fakti polling agency, via today's Diena newspaper.

ZZS 11.5% (+1.1%)
PCTVL 10.4% (unch.)
Tautas Partija 9.8% (+0.9%)
Jaunais Laiks 9.5% (-1.3%)
TB/LNNK 6.6% (-1.4%)
LPP/LC 4.9% (-0.2%)
Saskanas Centrs 4.7% (-0.6%)
Social Democrats 3.8% (+0.7%)

Projected seats in the parliament:
ZZS 19 (+2)
PCTVL 17 (-1)
Tautas Partija 16 (+1)
Jaunais Laiks 15 (-4)
TB/LNNK 11 (-3)
LPP/LC 8 (unch.)
Saskanas Centrs 8 (-1)
Social Democrats 6 (+6)

The previous poll is here. There are some interesting events surrounding the current poll (the numbers are unofficial because the polling company refused to release them!). More on that in a few days.

US visa problem: completely outrageous

Today's most popular story from the TVNET news (by the number of comments it received): US visa interview ends with humiliating denial.

A music teacher from Talsi and four of her students were invited to give a sequence of concerts in US, to Latvian-American communities. On June 28, they went to US embassy in Riga for visa interviews. All of them were denied visas. The most outrageous aspect is that one of the students was not even asked a single question! The consular official just took her fingerprints, looked at her application form and denied the visa!

Supposedly, the official was concerned about them not returning to Latvia after their visit. This is a complete nonsense. Latvian American organizations have invited speakers and arts performers from Latvia many times over the last 15 years and I do not know of any instances when a person invited by a major Latvian American organization has not returned to Latvia.

Now, this is not the only case when a Latvian has been denied a US visa without a good reason. I know other cases, both among my friends (and friends of friends) and among people about whom I would read in newspapers. (One newspaper story from 4 years ago: Martins Karsums, the top junior hockey star in Latvia was denied visa when he wanted to play in a junior team in US. Luckily, that did not hurt his hockey career too much and he was still drafted by NHL in 2005.) What makes this case special (specially outrageous, that is) is the official denying visa without asking a single question. Does he think he can read minds? Or does he deny applications based on his mood?

July opinion poll

From "Latvijas fakti". The headline: The popularity of all [major] parties slightly down. The numbers (and the change compared to June opinion poll):

Jaunais laiks 10.8% (-0.9%)
PCTVL 10.4% (-0.2%)
ZZS 9.8% (-0.9%)
Tautas Partija 9% (-1.1%)
TB/LNNK 8% (-0.2%)
Saskanas Centrs 5.3% (-0.5%)
LC/LPP 5.1% (-0.4%)

This translates to the following numbers of seats in parliament:
Jaunais laiks 19 (unchanged)
PCTVL 18 (+1)
ZZS 17 (unchanged)
Tautas Partija 15 (-1)
TB/LNNK 14 (+1)
Saskanas Centrs 9 (unchanged)
LC/LPP 8 (-1)

Almost nothing has changed.

Why do the journalists like the negative headlines so much?

Today's headline from Delfi:

Last year, the number of suicides in Latvia exceeded the number of deaths in traffic accidents

Scary, isn't it? I looked up the actual report by Central Statistics Office. Compared to five years ago, the number of suicides in Latvia has declined by 27% and the number of deaths in traffic accidents has declined by 30%.

Why do the journalists like the negative headlines so much?

UPDATE: I posted this and realized that both of my previous posts were about corruption. Well, maybe this weblogger also favors negative topics.

Lembergs

Yesterday, I saw two news stories on Aivars Lembergs, the mayor of Ventspils:

Politics section: Union of Farmers and Greens nominates Lembergs as their candidate for Prime Minister
Crime section: Prosecutor's office charges Aivars Lembergs with bribery and money laundering

Lembergs has been banned from leaving Latvia without prosecutor's permission and may have to pay a bail of 1 million lats (1.4 million euros). It's a huge bail but Lembergs' personal wealth is in tens of millions of lats.

The timing of events is quite interesting. Most of the charges are about events that took place from 1993 to 1995. Prosecutors were not in a hurry to charge Lembergs while he was a mayor of a mid-size town. But, with Lembergs having political ambitions on a national level and election coming up in 2.5 months, things changed and old allegations are now prosecuted vigorously.

Lembergs is dismissing the charges as politically motivated. Well, the charges may not be politically motivated but the decision to bring them up now (after not trying to charge him in previous 10 years) probably is.

"Everyone investigating everyone on corruption charges" remains the main theme for October 2006 elections.

New Era?

Jaunais Laiks (New Era Party) emerged in 2002, on a promise of fighting corruption. After 2002 election, New Era Party leader Einars Repse became the prime minister of Latvia. His coalition government only lasted for slightly more than a year but the New Era Party now leads municipal governments in several cities, including Riga.

This week, I saw two news stories on what the New Era Party has become:

The first story reveals interesting coincidences between decisions by national and city governments and large donations to the New Era Party. One example. "Ionica" company signs a 70,000 lat (100,000 euro) contract with city of Riga (whose mayor, Aigars Aksenoks belongs to the New Era Party) for creating an open-air skating rink. On the same day, the owner of the company donates 9,960 lats to the New Era Party. The article from "Diena" newspaper reveals several other stories similar to this one.

The second story involves the city government of Jurmala, a sea-side resort town. The city is lead by mayor Inese Aizstrauta who used to belong to New Era Party, until she was expelled from it a few days ago. The conflict between her and the party was over the city development plan which determines which parts of the city are open to new construction. Many parts of Jurmala are fairly prestigious places to live. Free land is scarce and a lot of it is protected for enviromental reasons. As a result, permits to build new buildings can be very valuable.

According to Aizstrauta, she was pressured by Dans Titavs (an influential New Era member who used to be one of two aides to New Era's prime minister Repse) to allow several construction projects to go ahead. Aizstrauta-lead city council voted for the development plan without Titavs-supported projects. In a few days, New Era party declared that the development plan was corrupt and expelled Aizstrauta, together with two other New Era city council members, from the party.

Meet the New Era. Same as Old Era?

Aizstrauta says that she joined the party hoping to change Latvia for better. But later, she discovered that there is "another New Era" of people who abuse popular trust in selfish interests. Besides Titavs, she named party's secretary-general Edgars Jaunups as one of those people.

For myself, I will be even more skeptical of political parties that promise an end to "politics as usual".

June opinion poll

According to Latvijas Fakti:

Jaunais laiks 11.7% (+1%)
ZZS 10.7% (+0.2%)
PCTVL 10.6% (+0.9%)
TP 10.1% (-0.2%)
TB/LNNK 8.2% (+0.3%)
Saskanas centrs 5.8% (+0.7%)
LC/LPP 5.5% (+1.7%)
Social Democrats 3.5% (+0.1%)

This translates to the following number of seats in the parliament:
Jaunais laiks 19
ZZS 17
PCTVL 17
TP 16
TB/LNNK 13
Saskanas Centrs 9
LC/LPP 9

Social Democrats are slightly short of 5% threshold. (Since the poll includes people who are undecided or will skip the election, 3.5% actually means 4.9% of those who have decided to vote for one of parties.)

Last month's poll is here.

Having a Latvian name may be a problem

...if running for public office in Los Angeles. Judge's Loss Stuns Experts: Election system and the jurist's Latvian name are cited is the headline in today's LA Times.

Dzintra Janavs, who has been a judge for 20 years, lost reelection to Lynn Diane Olson, a bagel store owner who almost has not practiced law in last 10 years. Janavs was rated "exceptionally well qualified" by Los Angeles County Bar Association (one of only 2 candidates with that ranking, out of 28 candidates for 18 judgeships), Olson was rated "not qualified". The legal community is in shock. Observers speculate that some voters may have preferred a candidate with a standard English name over the one with a non-English name of unknown origin.

Ouch. I thought Los Angeles was an enlightened multicultural city in which having or not having a common English name does not matter.

H/t: Volokh Conspiracy

Powerful speech

Latvian president Vaira Vike-Freiberga gave a speech to US Congress today. It was truly impressive. From the speech:

Pirms piecpadsmit gadiem Latvija kopā ar kaimiņvalstim Igauniju un Lietuvu atguva savu neatkarību pēc piecdesmit Padomju okupācijas gadiem. Tas tika panākts nevardarbīgā ceļā caur Baltijas dziesmoto revolūciju, pateicoties vienīgi šo tautu drosmei un apņēmībai. Tās bija gatavas stāties pretī padomju šautenēm un tankiem tikai ar saviem neapbruņotajiem cilvēkiem un dziļu pārliecību par savām tiesībām, labi apzinoties, ka šīs šautenes un tanki viņus jebkurā brīdī var satriekt, kā tie bija satriekuši tik daudzus pirms tam.

Fifteen years ago Latvia, along with neighboring Estonia and Lithuania, regained its independence after fifty years of Soviet occupation. The Baltic Singing Revolution achieved this by non-violent means, by the sheer courage and determination of the peoples of these countries. They were ready to face Soviet guns and tanks with nothing but their unarmed bodies and the deep conviction of their rights, knowing full well that, at any moment, these guns and tanks might crush them as they had crushed so many before.

Full text: Latvian, English. There is more on Latvia and our history there. No one says it better than Vaira Vike-Freiberga.

I first read the reports in the Latvian media and wasn't impressed. Then, I found the text of the speech and it was much more impressive than the reports.

Vike-Freiberga also met with Condoleeza Rice and discussed, among other things, the possibility that Latvia may be added to countries whose citizens do not need visa to visit US. There is a pending amendment to US immigration law that would add Poland to that list. If Latvia would be there together with Poland, it would save a lot of time for Latvians travelling to US. US visa procedures can be quite time-consuming, as I have experienced myself.

In the news

"Latvijai un Venstpilij", the local party of Ventspils city (which has been consistently getting 70%+ of vote in the city council elections) has decided to participiate in the October parliamentary election together with the nationwide Union of Farmers and Greens (Zalo un Zemnieku Savieniba). This was quite widely expected for a while. The rumors are that Aivars Lembergs, the leader of "Latvijai un Ventspilij", 16-year mayor of Ventspils (and, probably, one of 10 wealthiest people in Latvia) is thinking about becoming the Prime Minister. Officially, Lembergs is not yet confirmed as a candidate. But his name appears in the news more often then the confirmed candidates, his opponents are investigating his career at full speed and two journalists have just published a book accusing him in criminally abusing his power.

In other news, Linda Murniece of the oppositionary Jaunais Laiks (New Era) party has become the chairwoman of Anti-corruption Committee of the Latvian parliament. This may mean even more investigations for the Union of Farmers and Greens, Lembergs and everyone else around the current coalition government. "Everyone investigating everyone on corruption charges" seems to be the theme for this election campaign.

May opinion poll

"Latvijas fakti" opinion poll for the month of May:
Jaunais Laiks 10.7%
Zalo un Zemnieku Savieniba (ZZS) 10.5%
Tautas Partija (TP) 10.3%
PCTVL 9.7%
Tevzemei un Brivibai/LNNK 7.9%
Saskanas Centrs 5.1%
Latvijas Cels/Pirma Partija 3.8%
Social Democrats 3.4%

This would translate to following numbers of seats in Parliament:
Jaunais Laiks 17
ZZS 17
TP 17
PCTVL 16
Tevzemei un Brivibai/LNNK 13
Saskanas Centrs 8
LC/LPP 6
Social Democrats 6

Disclaimer: Polls are provided for entertainment purposes only. The popularity of political parties may change significantly between now and the upcoming election in October 2006.