Modern day Latvia

Latvian Government lead by Māris Gailis on 1995

It’s a bit too early to write a history of the last twenty years of the independent Latvia. Many things that happened and happening right now needs a greater period of time to objectively understand them. Only now Latvian historians are starting to understand the period of the Soviet occupation that was not so long time ago. And me who spent most of youth in the 90ies and 2000ies are not the one to fully describe this time.

Latvia began its second period of independence on a rocky road. The transformation from Communism to Capitalism was a painful experience for many. The difference between Latvia and Russia that Latvia actually had an experience of capitalist economy. So it was Latvian will to restore the former glory of pre-war Latvia.

To enter the free market economy many things had to be sacrificed. Most of the Soviet industry including VEF and Radiotehnika went bankrupt leaving thousand of unemployed people.  There were many reasons for this – 1) the Soviet industry was only made for the Soviet market that broke down completely 2) large part of the civil industry was actually secretly used by the Soviet army 3) Latvian government made an insufficient privatization program that allowed many to do schemes and ruin the enterprises that could be saved. Similar problems happened in the countryside where long hated collective farms were disbanded. However, the new local landowners could not accumulate all of the cultivated lands. In both cases the new private owners of factories and farmland lacked recourses to develop them. Lack of money and working force was the reason why so many things made during the Soviet times went to waste. The new Latvian government could make a pragmatic slow transition to free trade market like Slovenia. However, the newly elected Saeima was again caught up in endless multi-party struggle. A banal reason for the failures of the 90ies was simply the incompetence of the ruling people and will to gain easy money.

Until the new elections in 1993, the official government was the Higher Council of the Latvian Republic a relict from the Soviet past. The leading Prime Minister Ivars Godmanis started a wave of reforms and was best remembered for his portable stoves he introduced for houses without no central heating. The time of 1991 to 1993 was the time of the great lack of recourses and rather chaotic privatization.

Latvian politicians did not learn from the past experiences of the too many political parties. In 1993 the Saeima was elected again since 1931. The Latvian Popular Front that led the independence movement had broken into many movements. It did not even make it to Saeima.  Instead the ex members of the communist party and new born politicians formed a “Club-21”. It was a political interest group that formed a new mass party called “Latvian Way”. It was a right wing centrist party that scored 36 seats in the parliament. The Latvian National Independence Movement (LNIM) scored 15 seats, “Harmony of Latvia, Rebirth and Economy” won 13 seats, Latvian Farmers Union 12 seats, The Russian minority party “Equality” 7 seats, For Fatherland and Freedom 6 seats and Latvian Christian Democrat Union (LCDU) 5 seats. 15 other parties did not gain a single seat.

The fragmented parliament opened the way for the governmental instability that was present before the war. Two short lived Latvian Way governments by Valdis Birkavs and Māris Gailis failed to meet the expectations of the people. Māris Gails ended his reign in 1995 when the country was caught in its first major bank crisis. The Banka Baltija was a large holder of deposits that collapsed because of the scams of their owners. In result large number of people lost their money and the government was unable to return it. For many years the people responsible for the bank collapse was not sentenced showing the impotence of the Latvian juridical system.

The elections of the 6^th Saeima on 1995 was even more frustrating. It was the rise of the populism caused by the economic crisis. The Democratic Party Saimnieks (Landlord) gained a 18 seat lead by Ziedonis Čevers, a Minister of Interior during the Godmanis government. Latvian Way scored 17 seats. The Party lead by eccentric German national Joachim Zigerist won 16 seats. Fatherland and Freedom 14 seats, LNIM and Green Party union – 8 seats, Latvian Union Party -8 seats, LFU, LCDU and Latgalian Democratic party-8 seats, Peoples Harmony Party-6 seats and the Latvian Socialist Party -5 seats. That was the apogee of the political instability. No one was able to form a stable government. Then the president of Latvia Guntis Ulmanis elected in 1994 a relative of Kārlis Ulmanis step in proposed and independent candidate – successful non party businessman Andris Šķēle. He managed to lead the country from 1995 to 1997 with two cabinets. During this time certain stability was reached and people started to lose faith in populist parties.

 Latvian people came across on a very sad reality. First: many leaders of the independence movement had lost it’s place in Latvian politics right after the restoration. Instead the political arena was taken by the new born businessman, functionaries of the ex communist party and people who had no connection with the struggle for independence. Second: Latvia inherited heavy burden from the Soviet past – the Soviet immigrants. They did not want to leave and Latvia was unable to force them. The ex Soviet forces now the Army of the Russian Federation was still in Latvia until the full withdrawal in 1994. In so the attempts of decolonization could cause similar bloodshed as in Moldavia and Caucasus. The first instance of the Citizenship law made in 1994 was very strict granting citizenship people born before 1940 and their descendants. That left a large part of the Soviet immigrants. This made Russia to start a constant campaign against Latvia who accused her of discrimination of the Russian speakers. The citizenship law had been improved many times allowing people to naturalize more easily. Until this day some 326 735  people are still without proper passport. The process of naturalization has slowed down because many have chosen the Russian citizenship instead and those remaining are simply unable to pass the language laws. Others want automatic citizenship.

These two problems also the economic failures because of it made many protest groups. The ones who resent the current political system and strive for more national authoritarian government, others who want to revise back to communism. And the third part of people who oppose the government by simply leaving for another country.

The most important decision made by the early leaders was the goal to join the European Union and NATO. It was a door to both economic and political stability and most external security from Russia. The path to integration was hard as Latvia had to fill many obligations, but it was a logical step. Knowing the pre-war experience when Latvia was mostly on its own the membership of the EU and NATO who were seemingly strong at that time was a right move.

The elections of 1997 was a victory for the new Andris Šķēle party known as the Peoples Party (PP). Second came the Fatherland and Freedom, third Latvian Way. Russian Peoples Harmony Center, Latvian Farmers Union, and Latvian Social Democrats the New Party lead by emerging businessman Ainārs Šlesers. This was the landmark election as it sets a new order of the parties that was lasting for many years. The top political leaders – Andris Šķēle, Ainārs Šlesers and the major of Ventspils Aivars Lembergs who supported the LFU became the main political players. Later they were called oligarchs, the A team and was associated with corruption and state forgery. Aside from them the old timer nationalists gathered around The Fatherland and Freedom. In theory they believed in the ideals of the independence movement, but in practice they were caught up in the corrupt political games. The other side growing stronger over the years was the Russian party lists that were born out of remnants of the Interfront movement and new generation of the Russian speaking politicians. As the most Latvian parties except the Social Democrats was right wing, these Russian speaker parties posed as leftist. As the amount of naturalized soviet immigrants rose up this political fraction became stronger to the level until this day. And not without the help from Moscow.

Allegoric painting showing Andris Šķēle as the new God of the Latvian politics

Andris Šķēle won elections, but lost the Prime Minister seat. The nationalist Guntars Krasts became PM, but was replaced by Latvian Way Vilis Krištopāns on 1999. Andris Šķēle finally took back the PM seat in 1999, but May 2000 lost it to New Way Andris Bērziņš (not to confused with the current President of Latvia).

The elections of 2002 brought new political faction in the Latvian politics. The president of the Bank of Latvia Einars Repše decided to stand against the oligarch parties. His new party The New Era achieved 26 seats, Peoples Party 20 seats, Latvian Farmers Union 12, the Ainars Šlesers Latvian First Party – 10 seats, Fatherland and Freedom 7 seats. The Russian party “For Human Rights in United Latvia won 25 seats marking first great success of the Russian fraction. The old timers Latvian Way was voted out of the parliament.

Einārs Repše became the PM and issued ambitious reforms and austerity policy. During his reign, Latvia finally joined the EU. The referendum results was 67,5% for and 32,5% against. Some say since the treaty for joining was signed before the referendum, it had no real effect. However, Norway had signed the treaty for joining EU twice and twice it was rejected by the Norwegian people. And Norway never became the member of the EU. Latvia officially joined the EU on May 1 2004.

In the same year on April 2004 Latvia joined NATO. Latvian National Armed forces were finally found eligible for such organization. Latvia had taken part in the peacekeeping missions in Bosnia and Herzegovina and Kosovo. Consequently Latvian Armed Forces joined the peacekeeping missions in Afghanistan, Iraq and Mali.

NATO summit in Riga 2006
Vaira Vīļķe Freiberga in the middle

From 1999 the new President of Latvia was Professor Vaira Vīķe Freiberga an exile Latvian from Canada. With her great intellectual skills and charisma she gained much respect and admiration in the Western world. Her efforts boosted the joining the EU and NATO. Her tough stance on justice and corruption also made many politicians worried.

Repše did not manage to hold until the official joining in both EU and NATO. He was forced to resign after inter-coalition conflict. The leader of the Green Farmers Party in union with Latvian Farmers Party Indulis Emsis took power. He however made a minority government since the New Era party was against him. On December 2004 his coalition member Aigars Kalvītis from Peoples Party deposed him by voting against the state budget. In a conspiracy a period of oligarch influenced politics followed. Aigars Kalvītis took the PM office, three A – Team parties PP, LFU/GP and Latvian First Party made the monopoly of power for years.

The entry into the united European market opened doors to many goods and many evils. Latvia was overblown with foreign investments; Swedish banking took over most of the local bank sector. Latvia received EU funding. Areas such as education and road building benefited. Soon it also became the source of corruption to gain EU funds for scam projects.

The evils were the completely opened European workforce. Latvians slowly started to travel to places as Ireland, the UK and Germany for better paid work. Latvia reached the EU levels in prices, but not in pays. Another old problem that came from EU was the “servant syndrome”. The servant attitude to foreign powers was inherited from the times of serfdom and became pathologic during the Soviet occupation, when local communists were the most zealous of all to meet the Moscow demands. In the same way the Latvian bureaucracy was eager to meet every EU obligation and recommendation. Sometimes such diligence was disastrous as in example of ridiculous restrictions in the fishing industry that was struggling for years. And also the completely incompetent full liquidation of the Latvian sugar industry. However, it was not 100% strict order from Brussels to destroy all the sugar companies. The owners had a choice either to limit their production and make adjustments or sell their companies. They choose the easy way and sell the companies for large sums of money. Estonia, Lithuania and Poland on the contrary had many times defied the EU demands, interpreted them on their own and used the EU as practically they can get.

The modern Riga skyline – The Swedbank headquarters. Symbol of the so called fat years

The 2006 election was the victory for right wing A team parties. Peoples Party and Latvian First Party used holes in the election law to make a large scale election campaign funded by third party organizations. The massive deception using notable personalities who praised the ruling candidates resulted that in the first time after the regaining of the independence, the ruling parties received a mandate to rule further. The 2006 was also the first election for the Russian party block The Harmony Center.

Aigars Kalvītis took the PM seat again. The economics were booming, real estate market and bank credit business flourished. Kalvītis made an infamous New Year speech where he declared “If no foolishness be done, then we are awaited by seven rich years, fat years if we remember the story about the Joseph!” He promised that Latvia will achieve the European levels of prosperity and Latvians will not work in foreign lands, but be the masters of own land.

The ruling coalition tried to achieve this with little interference in the free market. Swedish banks and local as well encouraged people to take loans for their new homes as the real state market was doing well. From 2006 to 2008 an illusion of prosperity came to many. The austerity was in the past, as Ainars Šlesers declared “It’s time to push the gas pedal!”

However, already in 2003 the British historian Niall Ferguson predicted that the real estate bubble in US will someday burst starting the global economic crisis. As the time went by more people in Latvia also warned of the impending burst of the Latvian economic bubble. People such as the president of the Bank of Latvia Ilmārs Rimšēvičs were ignored by the government. An eminent problem became the inflation that the government was unable to tackle.

However, it was not the faulty economic policies that lead to downfall of Kalvītis. It was an arrogant abuse of power. First such abuse was done in 2007. Vaira Vīķe Freiberga finished her second term in office. Kalvītis felt resentment after she blocked the provisions in the security law. So he needed a loyal president. And in the secret meeting in the Riga city zoo, a famous surgeon Valdis Zatlers was chosen as the right candidate. The fact that a man with no political background was put forward for the highest office of the state was seen as arrogance of the ruling parties by many. The Russian party Harmony Center placed their candidate – Aivars Endziņš – the Chairman of the Constitutional Court, but Zatlers was elected sparking great resentment.

Then Kalvītis went further and tried to remove the head of Anti-Corruption Bureau Aleksejs Loskutovs who was inconvenient for him. However, Loskutovs saw this as an illegitimate act and seek legal action. He was supported by massive protests and people went against Kalvītis corrupt arrogant government. After 3 years of rule Kalvītis resigned on December 2007.

The mass movement against the Kalvītis government was nicknamed the “Umbrella revolution” because of the bad weather that made protesters to bring their umbrellas

The Ivars Godmanis came back as PM. He was a long time member of the Latvian Way party and took part in the Saeima. After the Latvian Way went decay and joined with the Latvian First Party Godmanis continued to work in politics as the Minister of the Interior affairs.

Godmanis started good; however he excluded the New Era party from his government that was the instrumental of so called “Umbrella Revolution” that achieved the downfall of Kalvītis. Latvia marked the 90 year anniversary on November. But the long predicted global economic crisis started in the US in August and later reached the EU. At autumn the Latvian locally owned bank the Parex went bankrupt. Godmanis took the step and went to bailout. The bank was nationalized. Again there were certain elements of unlawful activities and two former owners of the bank are in court.

Soon it became apparent that because of the burst of the real estate bubble and inability to cover all the costs the Latvian state budget is in real danger. Kalvītis declared that he has achieved the only surplus state budget in history. Now it turned out that Latvia may be heading for default. Godmanis was forced to ask for International Monetary Fund support. Whole Europe and especially Sweden were desperate to save Latvian economy.

On January 13 2009 the anger about the crisis erupted in full scale riots in the streets of the Old Riga. Valdis Zatlers issued a tough warning on Godmanis to make political changes or risk the dissolving the parliament. Godmanis survived however on March 2009 national resentment and mistrust by the president forced him to step down. Finally the New Era party had a chance to revenge on the oligarch parties. Aivars Lembergs had been already infamous about his corruption charges that lead him to temporary arrest and removal of the major powers of the Venstpils city. However, he has kept his major seat until this day and still holds great influence despite the charges. Andris Šķēle had already left the active politics in 2003 and lead the Peoples Party from behind. Ainārs Šļesers was in active politics. All three parties experienced the great downfall of the voters support. So they were not ready to take responsibility. The new PM from the New Era party Valdis Dombrovskis said: “Other parties had thrown the power upon our feet!” Contrary to eccentric Einars Repše, arrogant Kalvītis and erratic Godmanis, Dombrovskis is cool and well balanced man who could keep calm in most serious situations. Under his guidance Latvia went trough hard austerity reforms that made many unemployed and cut pensions. Latvian Education system and health care suffered greatly.

On 2009 historical turnout was reached in the Riga Municipal elections. The Harmony Center together with the Latvian First Party secured wins in Town council. Nils Ušakovs became the first Russian major of Riga. On 2010 The Harmony Center was wowing to win the Saeima elections and enter the parliament. Since the Harmony Center was union of many Russian parties, the Latvian parties also decided to gather forces. The outcome was rather strange: Unity was formed from New Era Party, Civic Union that actually broke away from New Era and also Fatherland and Freedom, and breakaway party Society for Different Policy that from dissenters of the Peoples Party. Two nationalist parties – the old Fatherland and Freedom/LNIM and new All For Latvia!, Joined to form a National Alliance. And two failed oligarchic parties – the Peoples Party and Latvian First Party/Latvian Way joined in For Good Latvia Block. 3 Latvian party unions against one strong Russian party union, plus the Green Farmers block lead by Aivars Lembergs. Harmony Center declared that are they firmly sure that they would win the elections. However the Unity managed to score 33 seats, Harmony Center – 29, Green Farmers – 22, For Good Latvia – 8 seats and National Union – 8 seats. Unity and Green Farmers formed a two party coalition that proved to be unholy union. Unity politicians and Dombrovskis himself soon found that the coalition work is heavily influenced by Lembergs, who was still in court (and still is). The relations between those two parties became volatile, but nobody was ready to finish them, because there was no real alternative.

Then one of the most decisive moments took place. President Valdis Zatlers looked for support for re-elections. During his four years in office he tried to wash away the reputation of oligarch elected president. He was no longer respected by the Peoples Party that went decay, Green Farmers also sought to remove him. The Unity was reluctant but openly declared support for his re-election. As the re-elections were heading close an unprecedented event occurred in the Saeima. Ainars Šlesrers received as a search order from the corruption bureau.  However, his deputy immunity required a parliament vote to allow the search and persecution. Saeima voted against. The vote was secret, but it was obvious that the oligarch parties and the Harmony Center voted against. Valdis Zatlers used this as a pretext to fulfill his long desire to dismiss Saeima. On May 28 in historical speech Zatlers issued an Order Nr.2 to issue the referendum to dismiss Saeima. He explained that the oligarchic rule is enough and it’s time to elect new parliament that defends justice.

The reaction from the ruling coalition and the parliament was not overly positive. To revenge on Zatlers, the dismissed parliament proposed new candidate Andris Bērziņš from the Green Farmers fraction. He started as the chief of the executive Soviet of Valmiera, later joined Latvian Peoples Front and voted for the restoration of the independence. He achieved great wealth by working as the chief of the Unibank and Latvanergo. He is the wealthiest retired person in Latvia. As Zatlers was still candidate for presidency he was voted against and Andris Bērziņs became the new president. Seen as stooge by the dismissed Saeima Bērziņs was booed by the angry crowd and still has not attained significant support.

Zatlers however did not back down. After the absolute majority voted for the dismissal of the Saeima, he founded a new party. Zatlers Reform Party was the mixture of the members of the old presidential administration, careerists and idealists. However, Zatlers failed to gather popular intellectuals in his party. The election of the 2011 was another turning point. Harmony Center won the elections, Zatlers Party came in second, Unity third, the National Alliance and Green Farmers also made it.

Harmony Center was unable to form the government themselves. They even lacked proper candidates for the Minister posts. The overall standpoint was not to allow Harmony Center into the government. But, then Zatlers came out with an imprudent proposal to form the government with the Harmony Center. In the time of one day the national hero turned into national traitor. It is possible that during his visit to Moscow where he met Russian leaders Putin and Medvedev, Zatlers had privately promised to support Harmony Center entry into the government. To put a more misery to his action Zatlers even said that his decision can only be changed with tanks, sparking memories of June 17 1940. After large opposition from National Alliance and Unity and protests within his own party, Zatlers withdraw his decision. A new government lead by Valdis Dombrovskis, a third time in office was formed. A “Justice Coalition” made of Unity, Zatlers Reform Party and the National Alliance were formed.

The initial battle against the oligarchs had been won, Andris Šķēle and Ainars Šlesers was voted out of the parliament. Ainars Lembergs Green Farmers had been placed into deep opposition.

But, a new national battle was called by the Russian national radicals and the Harmony Center. An ex national Bolshevik Vladimirs Lindermans and his henchmen managed to gather petitions for Russian as the second national language. After it was officially supported by Nils Ušakovs the major of Riga and the leader of the Harmony Center the referendum had to happen. On February 2012 more than 80% of people turned down the two state language solution. But, the radicals had achieved to spark an ethnic confrontation. Similar referendums took part in Ukraine and the Russian occupied territories of Georgia.

The Russian influence of Latvia has been growing steadily over the years. If the Latvian government had given citizenship to all soviet immigrants in 1994 the ethic confrontation had begun earlier. It’s doubtful that the new citizens would support the Latvian right wing parties. The majority of the naturalized citizens vote for the Russian parties anyway. If the ethnic confrontation on the parliamentary level had already occurred after 1994 Latvia would have a harder time to join the EU and NATO. However, because of the help of the Russian soft power and local unwise Latvian politicians the ethnic confrontation steadily formed. Latvian media are filled with Russian radio and TV. The local Russian press is one sided, their cable and satellite TV is filled with Russian retranslated TV sparking Putinist propaganda. Russia has installed many so called “compatriot NGO’s” who supports Russians outside Russia. Russian Foreign intelligence has proven connections with many parties including Latvian. Latvia is one of the weak spots on the EU and NATO map who is prone to even greater intrusion from Moscow.

Book by Dombrovskis and economist Anders Aslund explaining the Latvian crisis policies

On 2012 -2013 Latvian government declared that the recession has been ended and new growth has been begun. The International Monetary Fund mission ended in 2013. The heavy austerity policies, tax raise and pension cuts that averted state bankruptcy, but made many unemployed and boosted the immigration was called “a success story”. After all the relative recovery and growth was reached. To justify his long years in office and his policy Valdis Dombrovskis pushed for Latvian entry into the Eurozone. This was achieved in 2013 and on January 2014 Latvia will change Lats to Euros. This was done regardless of the opposition and skepticism, Dombrovskis managed to escape from referendums and stiff parliamentary opposition. We will see how good will be this step in Latvian future, but it will be beginning of the New Era.

The true Latvian success story is not made by the government, but by our people. Our talented opera singers, movie directors, actors and sportsman who have brought positive outlook about Latvia. Creativity, willpower and physical strength used for wise and just means are what can bring Latvia forward.