IN REVIEW October 18 – 24, 2011 Issue 42

CONTENTS

Government Latvian PM Releases New List of Ministerial Candidates Latvian President, PM Designate to Meet to Discuss Formation of New Government President Bērziņš Calls for Broader Coalition, Nominates Valdis Dombrovskis 11th Elects its Presidium Āboltiņa Becomes Second Speaker in Latvian History Re-elected for a Second Term Latvia’s Ex-President Elected Chairman of Parliament’s National Security Committee

Economics Latvian Unemployment Stays at 11.6% in Second Half of October Bank of Latvia: Global Price Shifts Push Down Producer Prices Latvia Places 21st in World Bank’s International Doing Business Rankings Bank of Latvia: Uncertainty Curbs Money Supply Growth President Bērziņš Calls on Professionals to Discuss Future Development of Railroads Former Head of Hungarian Airline Malev Appointed CEO of airBaltic

Foreign Affairs Latvian PM Dombrovskis Attends European Council Meeting in Brussels Secretary of State Teikmanis Participates in EU General Affairs Council in Brussels New Head of Latvian Parliament’s Foreign Relations Committee Defines Priorities Secretary of State Teikmanis: Latvia Deserves Solidarity, Not a Slap in the Face Secretary of State Accentuates Active Cooperation between Latvia, Republic of Korea Kristovskis and Upcoming Israeli Ambassador Discuss Bilateral Cooperation Latvian President Accredits Israeli, Belgian Ambassadors

Society Inga Žolude wins EU Prize for Literature Latvian Writer Juris Zvirgzdiņš Among Nominees for Astrid Lindgren Memorial Award Audiences Vote for the Best in Latvian Theater

Government Latvian PM Valdis Dombrovskis Releases New List of Ministerial Candidates Latvian Prime Minister Valdis Dombrovskis, who has been tasked with forming the new government, has released a new list of ministerial candidates on his website, the Baltic News Service reported. BNS reported that, according to the latest list, Artis Pabriks () would carry on as defense minister, Edgars Rinkevičs (Zatlers Reform Party, ZRP) would be appointed foreign minister, and Daniels Pavluts, who intends to join ZRP, would become economics minister. Andris Vilks (Unity) would stay on as finance minister, Rihards Kozlovskis (ZRP) would become interior minister, and Roberts Ķīlis would head the Education and Science Ministry, controlled by ZRP. Žanete Jaunzeme-Grende (National Alliance) would be appointed culture minister and Ilze Vinķele (Unity), welfare minister. Aivis Ronis would be put in charge of the Transport Ministry, jointly controlled by the Unity and ZRP. Gaidis Bērziņš (National Alliance) would be appointed justice minister and Ingrīda Circene (Unity) would be appointed health minister. Edmunds

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Sprūdžs of ZRP would become the new environment and regional development minister and would head the Agriculture Ministry, controlled by the Unity. According to the Rīga-based newswire, the first list of ministerial candidates, which Dombrovskis had submitted to President Andris Bērziņš, featured two candidates for justice minister: Gaidis Berzins and Jānis Bordāns (both of the National Alliance). BNS had reported previously that the new government coalition will comprise Dombrovskis’s center-right Unity bloc, ZRP, and the National Alliance, as well as six lawmakers who quit ZRP on the eve of the new parliament's inauguration. It is planned that the new government will be appointed this Tuesday, October 25. According to BNS, the would-be government's priorities for the following three years are the following: steady and sustainable national development; improving the wellbeing of each resident; reducing social inequality and stimulating the international competitiveness of the Latvian economy; a consolidated, inclusive society and a strong, modern national identity, ensuring at the same time the existence and development of the Latvian nation, language, and culture; strengthening of the rule of law and public confidence in state authorities; public involvement and initiatives; as well as tackling demographic issues, paying special attention to the repatriation of Latvian citizens and regional development. BNS also reported that the government's action policy will be aimed at the implementation of Latvia's sustainable growth strategy until 2030 and the EU's 2020 strategy. The action plan of Dombrovskis’s would-be Cabinet is available at the website www.valdisdombrovskis.lv.

Latvian President, PM Designate to Meet to Discuss Formation of New Government Latvian President Andris Bērziņš plans to meet on Monday with prime minister designate Valdis Dombrovskis from the center-right Unity bloc to discuss formation of the new government, announced the president’s press service, the Baltic News Service reported. According to the Rīga-based newswire, the meeting will start at noon on Monday. By Monday morning the president will also receive the results of screening on candidate ministers from law enforcement authorities, the president's spokeswoman Liga Krapane told BNS. The prime minister's spokesman Mārtiņš Panke told BNS that on Monday Dombrovskis plans to submit the government declaration to the president. According to BNS, the new government might be approved by the parliament on Tuesday, October 25. Prime Minister designate Valdis Dombrovskis, a representative of the center-right Unity bloc, for whom it is going to be the third successive term as the head of the Latvian government, has officially submitted to the Latvian president a list of the potential members of his new Cabinet. BNS reported that the president has requested opinions about the ministerial candidates from the Corruption Prevention and Combating Bureau (KNAB), the Prosecutor General’s Office, the Constitution Protection Bureau (SAB), which is the top national security agency in Latvia, and the State Revenue Service (VID). Should this opinion turn out to be negative for any of the candidates, BNS reported, such candidate would be rejected. On October 19, Bērziņš decided to nominate incumbent Prime Minister Valdis Dombrovskis, a representative of the center-right Unity bloc, as the prime minister in the new Latvian government, which would consist of Unity, the National Alliance, Zatlers Reform Party (ZRP), and the six MPs who recently left ZRP to form a group of independent lawmakers. Such ruling coalition will have 56 votes in the 100-member parliament.

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President Bērziņš Calls for Broader Coalition, Nominates Valdis Dombrovskis Andris Bērziņš met on October 19 with representatives of the reform and rule of law coalition – Valdis Dombrovskis, Valdis Zatlers, and Raivis Dzintars. They confirmed to the President that the model for the emerging governing coalition (50+6) has been preserved and that it is not possible to expand the coalition by allowing Latvian Alliance of the Green Party and Farmers Union (ZZS) MP Jānis Dūklavs, who is not actually a member of the alliance, to continue in his job as agriculture minister because the Zatlers Reform Party (ZRP) objects to this. After hearing about the ZRP’s differing position, President Bērziņš insisted that as broad a coalition as possible should be established in the name of government stability. That is why he recommended that Dombrovskis establish a Cabinet of Ministers in which all of the political forces which were elected to the 11th Saeima are represented. The President argued that representatives of all of these forces have confirmed their readiness to work in a coalition led by Dombrovskis, adding that representatives of Harmony Centre (SC) and the ZZS said so during meetings at the Rīga Castle on October 18 and 19. Dombrovskis and Dzintars confirmed their readiness to evaluate the President’s suggestion, and for that reason President Bērziņš left the room for a while. After exchanging views the three political forces still could not agree on an expanded coalition, and so they stayed with the initial offer. They said that all three forces will take responsibility for the 50+6 model for the coalition and for all of the people who are being nominated for ministerial posts. This position was also confirmed by Unity Party chairwoman Solvita Āboltiņa. At President Bērziņš’s suggestion, each person nominated for the Cabinet of Ministers by Dombrovskis’s, Zatlers’s, and Dzintars’s political forces was evaluated individually, requiring a confirmation of responsibility from each party’s representative. The President also expressed views and doubts about certain candidates in terms of their appropriateness for the relevant job. The initial proposal on a coalition involving ZRP and SC failed, and the various “lines in the sand” which parties have drawn around themselves have become an insuperable obstacle against a serious approach to serious issues. Because of this, and in line with the negotiations that he has had over the past several days with representatives of parliamentary parties, President Bērziņš feels that any further delay in the establishment of the government can seriously endanger work on next year’s national budget, as well as on other important issues. Accordingly, the current coalition model is the only one which can realistically be approved. At the same time, however, the President continues to believe that the decision does not keep parties from working to improve the model. “The first serious test for the coalition in terms of its ability to get work done will be the vote on the national budget in 2012. That must not be an experiment with the country or endanger our international obligations,” said President Bērziņš. He went on to say that “given that all three parties in the reform and rule of law coalition have confirmed that they are prepared to take responsibility for the six MPs who left the ZRP, I have taken the decision to ask Valdis Dombrovskis to establish the Cabinet of Ministers.” Bērziņš also said, however, that the vote on the government in Parliament will be possible only after the relevant institutions have submitted their views on the candidates for ministerial posts and the President has received a draft of the Cabinet’s operating declaration. President Bērziņš remains convinced that as broad a coalition as possible must be established so as to ensure the sustainable development of the country. This, he believes, will ensure that all of the political forces in the Saeima will take responsibility for what happens in Latvia.

11th Saeima Elects its Presidium On Tuesday, October 18, the 11th Saeima elected its Presidium by secret ballot. Solvita Āboltiņa, who represents the Unity party, was elected as the Speaker of the 11th Saeima. 3

MPs also elected two Deputy Speakers: Inga Bite, representing Zaltlers’ Reform Party, and Andrejs Klementjevs, elected from the alliance of political parties Harmony Center. Dzintars Rasnačs, who represents the national alliance of All for Latvia and For Fatherland and Freedom/LNNK, was elected as the Secretary of the Saeima, while Jānis Vucāns from the Union of Greens and Farmers was elected as the Deputy Secretary. During its first sitting, the new convocation of the parliament also elected tellers, members of the temporary Mandate, Ethics and Submissions Committee; it also approved the mandates of 100 MPs. The 11th Saeima is composed of 31 MPs elected from the alliance of political parties Harmony Center, 22 MPs elected from Zatlers Reform Party, 20 MPs elected from the Unity party, 14 MPs elected from the national alliance of All for Latvia and For Fatherland and Freedom/LNNK, and 13 MPs elected from the Union of Greens and Farmers.

Āboltiņa Becomes Second Speaker in Latvian History Re-elected for a Second Term On Tuesday, October 18, Solvita Āboltiņa was elected as the Speaker of the 11th Saeima; thus she has become the second Speaker of the Saeima in the history of Latvia who has been re-elected as Speaker after the election of a new parliament, reported the Saeima Chancellery press service. By a secret ballot, 51 MPs voted for and 45 MPs voted against the candidacy of Āboltiņa for the position of the Speaker of the 11th Saeima. “The Speaker of the Saeima does not represent only his/her political party; the Speaker represents the entire Saeima and the interests of all elected political parties,” said Āboltiņa to members of the Saeima after her election. “Despite the good and strong determination of one individual, nothing can be achieved without support. Latvia needs our joint efforts. I would like to thank you for expressing your confidence in me; that is a great responsibility, and I will do my best not to betray it.” Before being elected as the Speaker of the 11th Saeima, Āboltiņa was the Speaker of the 10th Saeima, a member of the Legal Affairs Committee and the European Affairs Committee, as well as the Chairperson of the Judicial Policy Subcommittee and a member of the Demographic Policy Subcommittee. Āboltiņa was also a member of the 9th and 8th Saeima. In 2004, she was a legal advisor at the Ministry of Foreign Affairs, and in December 2004 she assumed the position of Minister for Justice in the Cabinet of Ministers, headed by Aigars Kalvītis. Before being elected to the 8th Saeima, Āboltiņa was the Director of the Consular Department of the Ministry of Foreign Affairs. Solvita Āboltiņa has a degree in law obtained from the Faculty of Law of the . Photos from the election of the Speaker of the 11th Saeima: http://www.flickr.com/photos/saeima/sets/72157627796328183/

Latvia’s Ex-President Elected Chairman of Parliament’s National Security Committee Latvia’s former president Valdis Zatlers, now the leader of the centrist Zatlers Reform Party (ZRP), was elected chairman of the parliamentary committee for national security on Monday, October 24, the Baltic News Service reported. According to the Rīga-based newswire, the five-member committee elected Zatlers as chairman with four votes for and one abstention. Dzintars Zaķis, a representative of the center-right Unity bloc, was elected as the deputy chairman of the committee, and Jānis Urbanovičs, a representative of the opposition leftist pro- Russia Harmony Center, was elected as the secretary of the committee, BNS reported. The next meeting of the national security committee has been scheduled for Wednesday, October 26. 4

Economics Latvian Unemployment Stays at 11.6% in Second Half of October The unemployment rate in Latvia remained at 11.6 percent in the second half of October, according to provisional data provided by the Latvian State Employment Agency, the Baltic News Service reported. According to the Rīga-based newswire, the number of people officially registered as unemployed in Latvia dropped by 768 from the end of late September, to 130,891 at the end of October. BNS reported that among Latvia's regions, the lowest jobless rate (8.6 percent) was reported in the Rīga region. According to the newswire, the western Latvian region of Kurzeme followed with 12 percent; the central Latvian region of Zemgale with 12.5 percent, the northeastern region of Vidzeme with 13 percent; and the eastern region of Latgale showed the highest unemployment rate, at 19.7 percent. Though in Kurzeme and Zemgale the jobless rate slipped 0.1 percentage points, in other regions it remained unchanged over the past month, BNS reported. BNS also compiled data about the unemployment situation in the largest towns. The jobless rate in the Latvian capital Rīga was 8.1 percent in late October; the northwestern Latvian port city of Ventspils followed with 8.8 percent; and the jobless rate in the central Latvian town of Jelgava was 8.8 percent. At the same time, according to BNS, the highest unemployment rate remained in the eastern Latvian town of Rēzekne, where 17.8 percent of the working age people are out of work. At the end of September, the jobless rate in Latvia reached 11.6 percent, with 131,659 people registered as unemployed.

Bank of Latvia: Global Price Shifts Push Down Producer Prices Stabilization and even a drop in global prices has notably affected the price and cost trends in Latvia, reported Bank of Latvia economist Krista Kalnbērziņa, who added that in September, for the first time in the last ten months, producer prices posted an overall month-on-month decrease of 0.4%. According to Kalnbērziņa, prices mostly fell on account of shrinking producer prices of exported goods (0.9%); prices of goods sold on the domestic market edged down by 0.1% over the month. She observed that the annual rate of increase in producer prices continued on a downward trend, down to 6.8% in September. Writing for the website Macroeconomics.lv, Kalnbērziņa also reported that moderating cost increases were seen in the major sectors of manufacturing. “Over a month, prices fell in the manufacture of food products, basic metals and chemical products,” she wrote. “Producer prices recorded a drop only for products of wood manufactured for exports, on account of the weak growth in the major export markets. The recent pick-up in energy costs that started in April and was affected by the rise in the global energy prices last year and at the beginning of this year, still prevent prices in the overall industrial sector from decreasing.” The Bank of Latvia economist concluded her commentary piece for the website as follows: “The decline in producer prices should soon be reflected in the retail trade as well. The impact of global trends on price dynamics in Latvia will remain strong as the costs of the raw materials subject to the global price fluctuations account for a considerable share of production costs, in particular for products with lower value added. Although the global price rise pressures have eased due to weaker growth, the uncertainty related to the supply developments continues to maintain both food and energy prices at relatively high levels. To mention some of the developments affecting the global supply of goods in October: flood in Asia which has pushed up rice prices and the fact that Libya has resumed its exports of natural gas, giving rise to hopes that oil deliveries will also follow suit soon. That, in turn, would further ease the pressure on oil prices.” 5

Link to full text and graph: http://www.macroeconomics.lv/global-price-shifts-push-down- producer-prices.

Latvia Places 21st in World Bank’s International Doing Business Rankings Latvia has made progress in the World Bank’s international Doing Business 2012 ranking, as the country’s assessment has improved by ten positions, rising to 21st place. Latvia now aims to rank among the top 20 countries in the rankings. One of the tasks to fulfill in order to improve the rating is to bring order to the procedure of receiving the construction permits, said a group of experts on Friday, October 21, at a press conference devoted to the World Bank’s report Doing Business 2012 and Latvia’s results in the ratings. At the conference, Prime Minister Valdis Dombrovskis informed the media that Latvia currently ranks 21st in the study Doing Business, which is by 10 positions higher than last year. “Once we had set the goal to rank 20th in Doing Business. Now it seems that we can set a higher objective. Japan and Germany are right above Latvia, thus we can conclude that competition in business environment is becoming increasingly serious.” As reported earlier, the study of the World Bank Doing Business 2012 shows that Latvia is among those 12 countries where implemented reforms have substantially improved business conduct, ranking Latvia 21st among 183 world countries. The report shows that this year 245 reforms have been implemented in the economies of 125 countries, which is by 13% more than in the previous period. Latvia is among those countries that have achieved rapid improvement in their business environment. To achieve this result, Latvia has implemented several significant reforms: facilitated business start-ups by reducing the requirements for business start-up capital; simplified application procedure for installation of electricity connections; simplified registration of real property providing access to the property tax databases of local governments, as well as improvements made to the regulatory framework for insolvency. Before the press conference on October 21, Xavier Devictor, World Bank Country Manager for Poland and the Baltic Countries, also expressed his satisfaction over Latvia’s progress. “We would like to congratulate Latvia from being one of the best reformers worldwide this year,” he said. “The steps taken by the authorities to enhance the business environment are an important part of the recovery process. It is very encouraging to see that Latvia now stands in the 21st position in 2012 Doing Business ranking - a very good score, even compared with other countries in the region. We hope that this will continue to be reflected in increased investments and in the creation of jobs.”’ Devictor continued: “Particularly noteworthy are improvements in areas such as the new insolvency law that streamlines and expedites the insolvency process and introduces a reorganization option for companies, easing of the property transfers by allowing electronic access to municipal tax databases that show the tax status of property and eliminating the requirement to obtain this information in paper format, reducing the minimum capital requirement and introducing a common application for value added tax and company registration.” Meanwhile, the Senior Economist of the World Bank office in Warsaw, Marcin Piatkowski, had the following to say at the press conference: “Latvia has attained the good results by implementing substantial reforms in three areas: facilitated requirements for business start-ups, reduced business start-up capital, improved insolvency procedures, as well as facilitated procedures for obtaining electricity connection. However, reforms are needed in the area of construction, the infrastructure should be improved, and the opportunities of new technologies should be more actively used.” Doing Business is one of the most objective criteria for evaluation of Latvia’s current economical situation, investment and business environment, said the Minister of Economics of the Republic 6

of Latvia, Artis Kampars, during the discussion with the media. However, the work must be carried on, for example, to ease procedures for receiving construction permits. The minister informed on current improvements: from 210 days necessary to coordinate issuing of the construction permit, the time of the procedure has been reduced three times, to 70 days. Another important task at hand is the protection of investors and the procedure of consideration of commercial disputes. About Doing Business According to the data of the study Doing Business 2012, Latvia ranks among those countries where the implemented reforms have facilitated business conduct. The objective of the is to ensure that Latvia as an investment and business-friendly country ranks among the leading 20 countries in the study Doing Business 2013 (the estimates have been made on the basis of figures of Doing Business 2011). The study has been carried out since 2003. Ten criteria are analyzed in the study, which characterize how aligned is the country’s environment for doing business, including the solutions in case of insolvency, cross-border trade, business start-up procedures. To carry out the study, the economic analysts, researchers and experts from the public and private sector are involved. The results of Doing Business are one of the factors considered by the investors who look for new opportunities to develop their business. Study Doing Business 2012: http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/Annual- Reports/English/DB12-FullReport.pdf Photos of the press conference: http://www.flickr.com/photos/valstskanceleja/sets/72157627942949288/ Audio file: http://www.mk.gov.lv/files/db_preses_konference.wma Video: http://www.veritweet.com/gov/1250/Ministru.Kabinets.lv

Bank of Latvia: Uncertainty Curbs Money Supply Growth Aggravation in external markets, particularly in the euro area, as well as the persistently uncertain domestic political outlook dampened the possibility for businesses to increase their savings, and in September deposits received by banks and the total money supply contracted somewhat, while both household deposits and demand for cash continued on their upward trend, reported Bank of Latvia economist Vilnis Purviņš. Writing for the website Macroeconomics.lv, Purviņš reported that lending trends remained unchanged for the third consecutive month – a slow increase in loans granted to non-financial corporations and a more pronounced pick-up in those granted in lats persisted, with a fall in loans to households for house purchase contributing to the contraction of the aggregate bank loan portfolio. According to Purviņš, a further decline in the aggregate bank loan portfolio notwithstanding, the annual rate of decrease in domestic loans improved to 8.4%. He also reported that loans granted in euro continued to shrink whereas those granted in lats grew by 2.6%, with their annual rate of increase reaching 17.9%, a record high in annual terms since spring 2007. The share of lats loans in total loans also expanded (to 9.6%). In his commentary piece, Purviņš noted that in September, monetary aggregate M3, which reflects the amount of cash and non-cash instruments in the economy, decreased by 0.3%, with the annual growth of M3 amounting to 2.4%. He also noted that bank domestic deposits contracted by 0.5% in September as deposits made by businesses moderated by 2.3%. “Foreign currency savings of businesses decreased on account of the high expenditure on imports, while their lats savings shrank as a result of households' willingness to cut their spending and increase their deposits with banks. Hence household deposits grew by 1.1% in September,” the economist wrote.

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Purviņš concluded his commentary piece on Macroeconomics.lv as follows: “In view of the projected second wave of the global economic crisis and the coming winter, both businesses and households are highly likely to maintain a certain safety cushion of savings, thus contributing to the stabilisation of money supply; at the same time risks of a decrease in export income intensified – that could limit the money supply. Lending activity growth in its turn could be limited to a slow increase in loans granted to the most competitive businesses. To promote lending and increase the potential of the Latvian economy during global turmoils, at the current juncture it would be most important to draft the next year's budget with a deficit no higher than 2.5% of GDP (2% would be an optimum) immediately after the new government has been approved, without undue postponing of the approval of the draft Law on Fiscal Discipline which has already been drafted and submitted to the Saeima, and to return to non-deficit budgetary position in 2013.” Link to full text: http://www.macroeconomics.lv/uncertainty-curbs-money-supply-growth.

President Bērziņš Calls on Professionals to Discuss Future Development of Railroads On October 17, President of Latvia Andris Bērziņš delivered the opening address at the 3rd international regional railroad business forum, Strategic Partnership 1520: The Baltic Region. The forum focused on the interaction mechanisms of the 1520 and 1435 railroad systems in the context of the development of the transport business in the Baltic region. “This is a very important era for Latvia and the Baltic States,” the President said in his opening remarks. “After 150 years of railroad operations in this territory, we must now choose the best future strategy in terms of where and how we must develop the systems further.” The President also said that the forum is an example of successful cooperation. People can exchange experiences and find the best solutions individually and together. Bērziņš insisted that a lack of harmony in railroad operations is too expensive, something that can be seen in an issue that has been of importance for the past 100 years. That is the fact that some railroad tracks are 1520, while others are 1435 mm wide. The President also insisted that it is professionals who must debate the best future strategy for railroad operations, adding that politicians, then, are the ones who must take a sensible final decision. At the conclusion of his address, President Bērziņš said that he hoped that the forum would be successful in pursuit of the major goals which are in place. The regional business forum International Partnership 1520 has been held every year since 2006. The forum attracts directors of 1520 and 1435 railroad administrations, major freight transporters and operators, owners of cargoes, as well as people from banks, the investment sector, as well as applied business and scientific organizations.

Former Head of Hungarian Airline Malev Appointed CEO of airBaltic The supervisory board of Latvian national carrier airBaltic agreed on October 21 to appoint Martin Gauss, the former general director of Hungarian national airline Malev, as the new executive director and board chairman of airBaltic, announced airBaltic's spokesman Janis Vanags, the Baltic News Service reported. According to the Rīga-based newswire, Gauss will start in his new office on November 1. Gauss announced in a statement to the press, quoted by BNS: “I am very much looking forward to being part of the airBaltic team. The airline has a very strong brand and is an energetic and innovative company. It will be my task to set up clear structures which are missing at present. I will introduce corporate governance in order to reach a financially positive airline operation." According to information provided by airBaltic and quoted by BNS, Gauss is a professional with nearly 20 years of experience in the airline industry and in the (EU) aviation market. BNS reported that between April 2009 and May 2011, Gauss was the CEO of the Hungarian carrier Malev, an airline with 22 aircraft and more than three million passengers in 8

2010. There he simplified the fleet from five different aircraft types to two and established new structures. According to BNS, Gauss started his aviation career as a pilot on B737s with British Airways subsidiary Deutsche BA in 1992, and by 1995 he was working in the management of the airline. He was manager of the Flight Operations Support Department before he became chief for the Ground Operation Department, BNS reported. BNS also reported that in October 2007 Gauss joined the Cirrus Group and became CEO of Cirrus Airlines and Managing Director of the Cirrus Group. In this function he managed the centralization of the headquarters to Munich. He completed this project in June 2008, after which he established his own company as a consultant to the airline industry. Martin Gauss flies a Boeing 737 as a Captain and has recorded more than 8,000 flying hours on Boeing 737s. According to BNS, the executive board of airBaltic consists of three members. Two of the executive board members – Laila Odiņa and Vitolds Jakovļevs – were elected by the board already early October. Established in 1995, airBaltic belongs to the Latvian state, which holds 52.6 percent of shares, and Baltijas Aviacijas Sistemas (Baltic Aviation Systems, BAS), which holds 47.2 percent. A 50 percent stake in BAS belongs to former airBaltic president and CEO Bertolt Flick, and another 50 stake is held by Taurus Asset Management Fund Limited, a company registered in the Bahamas.

Foreign Affairs Latvian PM Dombrovskis Attends European Council Meeting in Brussels On October 23, the European Council meeting was held in Brussels, where Latvia was represented by Prime Minister Valdis Dombrovskis. The European Council focused on the economic policy issues, paying special attention to growth enhancing measures, economic governance, and internal priorities, and external aspects of the economic policy - Summits with strategic partners of the EU, preparation for the G20 Summit in November 2011, as well as the United Nations’ Climate Change Conference to be held in Durban. The implementation of the objectives set by the Eastern Partnership was also discussed as well as the situation in southern neighboring region of the EU and Iran. The leaders welcomed the announcement by the terrorist group ETA as of October 20 on termination of the armed struggle. The EU leaders focused on the economic stimulus measures and promotion of competitiveness of the European Region in the world. The European Council gave a clear signal that the EU Member States shall continue the implementation of the EU 2020 Strategy, particularly in the areas that have the most direct impact on growth and its promotion. The heads of state also assessed the progress in strengthening the regulatory framework of economic governance and financial sector. As regards the external aspects of the economic policy, the European Council discussed ways of promoting foreign trade and investment attraction to encourage growth and creation of new jobs. This discussion on the external aspects of the EU’s economic policy was held with a view at the summits of the EU and third countries, including the Eastern Partnership, Russia, Ukraine, and Brazil, as well as by assessing the progress regarding the implementation of the European Council’s conclusions as of September 2010. The European Council identified the following short-term priorities of the economic policy - Act of the Common Market, common digital market, reduction of administrative burden, and implementation of specific recommendations in the Member States, paying particular attention to promotion of employment and growth. The European Council agreed on the need to coordinate actions between the eurozone and the European Union, fully respecting overall integrity of the EU and its operation in the 9

composition of 27 Member States. Therefore, the countries that are not members of the eurozone will be promptly and regularly informed about preparation for Summits and their results. Similarly, within the framework of the European Council a discussion was held on the necessary amendments to the Lisbon Treaty to strengthen the governance of the eurozone. The Heads of State and Government will continue the discussion on Wednesday, October 26. About the European Council: The European Council was established in 1974 with the intention of establishing an informal forum of discussion between the Heads of State and Government. The European Council acquired official status in 1992 by the Treaty of Maastricht. Since then the European Council has been setting general political guidelines and priorities in all areas of activity of the EU. The European Council consists of the heads of state of the Member States, together with its President and the President of the Commission. It meets twice every six months and the meetings are convened by the President of the European Council. Photo: http://www.flickr.com/photos/valstskanceleja/sets/72157627957351272/

Secretary of State Teikmanis Participates in EU General Affairs Council in Brussels On October 22, the Secretary of State of the Ministry of Foreign Affairs, Andris Teikmanis, participated in the European Union (EU) General Affairs Council in Brussels. At the General Affairs Council preparations were made for the European Council meeting of October 23, which will focus on the matters of economic policy, with special attention being paid to growth promotion measures, economic governance, domestic priorities, and external aspects of economic policy. Latvia holds the view that at the European Council a discussion is needed concerning the eurozone, including various proposals on enhancing the eurozone governance methods. Teikmanis emphasized in the discussion that it is important for Latvia as a potential eurozone member to get involved in the preparations of the decisions concerning the stability of the euro and the eurozone as a whole. A balance must be achieved between a strict fiscal policy and facilitating economic growth. The European Council will also discuss the preparation for the G20 Summit, a common EU position for the UN Climate Conference in Durban, the performance of the Eastern Partnership goals, and the situation in the EU’s southern neighborhood and Iran.

New Head of Latvian Parliament’s Foreign Relations Committee Defines Priorities The effectivization of the foreign service and Latvia’s relations with NATO and the EU will be the priorities of the new head of the Latvian parliament’s foreign relations committee, Romualds Ražuks, the Baltic News Service reported. Ražuks told the Rīga-based newswire that he has had experience in foreign affairs since February 2003, when then defense minister Girts Valdis Kristovskis offered him a job at the ministry, and he has “worked with bilateral affairs” since then. According to BNS, the first task for Ražuks in his new office will be to identify the foreign policy priorities, including the need to involve the foreign service in economic assignments and external communications mentioned in the program of his party, the centrist Zatlers Reform Party (ZRP). “The foreign service has to become more effective,” the foreign relations committee chairman was quoted as saying, adding that it was the task for the Foreign Ministry. BNS also reported that other priorities for the committee chairman will be Latvia’s participation in NATO and international operations, as well as relations with the EU, including the Cohesion funding and payments to farmers.

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In response to a question about cooperation with the four representatives of the opposition leftist pro-Russia Harmony Center on the foreign committee, Ražuks told BNS that letting lawmakers voice their opinion was one of his responsibilities as the committee chair. “They are not Latvia’s enemies,” he was quoted as saying, adding that those lawmakers would not be a problem for the committee or the parliament. According to BNS, Ražuks is a Latvian politician of Lithuanian descent. He was one of the leaders of the Latvian Popular Front, the organization that spearheaded Latvia’s drive for independence in the early 1990s. He has been elected to the Rīga City Council and the Latvian parliament in the past. He has also been a member of the city council of the Latvian sea-side resort town Jūrmala and briefly also the mayor of Jūrmala, BNS reported. In 2008 Ražuks joined the Civic Union party, a member of the center-right Unit bloc. According to BNS, when Latvia’s former president Valdis Zatlers started organizing a new political party after the previous Latvian parliament failed to elect him for the second term as the Latvian president, Ražuks quit the Civic Union and joined the new party, ZRP. He was elected to the new Latvian parliament as a representative of ZRP.

Secretary of State Teikmanis: Latvia Deserves Solidarity, Not a Slap in the Face On October 20 in Brussels, in a conference on the EU Multiannual Financial Framework for 2014-2020, the Secretary of State of the Ministry of Foreign Affairs (MFA), Andris Teikmanis, sharply criticized the EC proposal to reduce the Cohesion Policy support by 20%. The Secretary of State accentuated that it was unacceptable to punish in this manner a member state which has successfully implemented drastic measures of national budget consolidation, is conscientiously following the terms of an economic recovery program, and still remains one of the leaders in the absorption of the EU funding. Teikmanis noted that, at this moment, the Latvian people deserve solidarity from the European community, not a slap in the face. Secretary of State Teikmanis also expressed disappointment at the EC’s proposal concerning the Common Agricultural Policy: it offers only a “facelift,” a reshuffling of resources within the framework of rusty policies. Teikmanis called on the relevant institutions to find the willpower for finally breaking out of the fetters of history and underpin direct payments with up-to-date and objective criteria, thus providing for equitable and fair conditions to all the EU farmers in the common market. The conference was organized by the Polish Presidency, the EC, and the . Taking part in the event were representatives from national governments and parliaments, as well as MEPs and officials from EU institutions. The conference aimed at launching a broad discussion on the EC proposal published on June 29 concerning the EU Multiannual Financial Framework for the coming seven years. As reported earlier, Latvia’s focus in negotiations on the European Union’s multiannual financial framework for 2014-2020 lies in two priorities: first, adequate funding volumes under the Cohesion Policy enabling Latvia to approach the EU average development level through favorable conditions created for the growth of Latvia’s economy and infrastructure development; second, fair and equitable competition conditions for Latvia’s farmers in the common EU market. On June 29, 2011, the EC came forward with its proposal for the EU’s multiannual budget. Negotiations on the proposal will continue throughout the next year, and the final agreement between the European Parliament and the Member States is planned to be reached at the end of 2012 or in early 2013.

Secretary of State Accentuates Active Cooperation between Latvia, Republic of Korea On October 18, the Secretary of State of the Ministry of Foreign Affairs, Andris Teikmanis, together with the Ambassador of the Republic of Korea (South Korea), Eom Seock-Jeong, 11

launched a forum to mark the 20th anniversary since the establishment of Latvia-South Korea diplomatic relations. In his address, the Secretary of State noted friendly relations between Latvia and South Korea and dynamic cooperation between both countries developed over the recent years in culture, education, and economics. The exchange visits by senior state officials this year is proof to the strengthening of the political dialogue. Prime Minister Valdis Dombrovskis made his first official visit to South Korea in June, and the Chairman of the National Assembly of the Republic of Korea, Park Hee-tae, arrived on an official visit to Latvia in June. Secretary of State Teikmanis noted that the relations of both countries demonstrate their ability to cooperate across geographical distance and cultural differences. Exchanges in art, culture, and education indicate to an increasing mutual interest and awareness. The forum participants, including representatives from the Korea Institute for International Economic Policy and the Korea Small Business Institute, discuss economic cooperation possibilities. Those present will also be informed about the distinctive features and current developments in Korean culture. The forum is held as part of Korea Week, the aim of which, while marking the anniversary of the restored diplomatic relations, is to introduce the society in Latvia to Korean culture and promote cooperation between the countries. Korea Week is organized by the Embassy of South Korea in Stockholm. Latvia and South Korea established diplomatic relations on October 22, 1991. Since then, both countries have concluded a number of important agreements, including the Agreement on the Promotion and Reciprocal Protection of Investments, as well as the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. As from 2003, Latvia and South Korea have agreed on the abolition of visa requirements.

Kristovskis and Upcoming Israeli Ambassador Discuss Bilateral Cooperation On October 18, the Latvian Minister of Foreign Affairs, Ģirts Valdis Kristovskis, met with the upcoming Ambassador of Israel to Latvia, Hagit Ben-Yaakov. During the meeting, the parties discussed current matters concerning Latvian-Israeli relations, developments in the Arab world and the Middle East, and prospects for the peace process. Both sides expressed gratification with the active political dialogue between both countries to date, and voiced determination to seek possibilities for expanding economic relations. In this respect, the forthcoming launch of the Latvian-Israeli Chamber of Commerce in Tel Aviv in November of this year was discussed; the organization is expected to become an element of support for the promotion of economic relations. Foreign Minister Kristovskis congratulated the Israeli side with the agreement achieved on the release of an Israeli soldier Gilad Shalit and voiced hope that this will facilitate the resumption of the dialogue between Israel and the Palestinian National Authority in the near future. In the context of the Middle East Peace Process, the minister expressed support for the statement adopted by the Middle East Quartet (UN, the EU, the US, and Russia) on September 23 and efforts toward resuming peace talks between Israel and the Palestinian National Authority with the aim of reaching a two-state solution. The Foreign Minister of Latvia accentuated the necessity to stay on the path of negotiations and desist from taking unilateral steps that would obstruct the course of the peace process.

Latvian President Accredits Israeli, Belgian Ambassadors Latvian President Andris Bērziņš granted accreditation on October 18 to the new ambassadress extraordinary and plenipotentiary of the State of Israel, Hagit Ben-Yaakov, and to the new ambassador extraordinary and plenipotentiary of the Kingdom of Belgium, Frank Arnauts.

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At his meeting with Ambassadress Ben-Yaakov, President Bērziņš congratulated her on her appointment and said that Latvia is interested in strengthening the bilateral political relationship between the two countries. He said that he welcomes the active participation of Latvia’s Jewish community in public affairs. The President and the ambassadress also discussed the important international issue of Palestinian statehood. Bērziņš said that Latvia supports the resolution of the matter via negotiations. During the President’s meeting with the new Belgian ambassador, the two officials discussed ways of working together in the European Union and NATO, particularly in terms of the EU’s Cohesion Fund and support for farmers. President Bērziņš insisted that the EU’s next multi-year budget framework must provide for equal payments for Latvian farmers. He also said that people in Latvia have been more active than those in other EU member states in pursuing funding from the Cohesion Fund, adding that this is one indicator to show that financing from the fund must not be reduced. Bērziņš and Arnauts also discussed economic cooperation between the two countries, with the President calling on Belgian businesspeople to be active in forming partnerships with businesspeople in Latvia. The country, he said, is very much open to investments. Hagit Ben-Yakov (b. 1968) received a master’s degree in Middle Eastern studies and history from the Jewish University of Jerusalem and joined the Israeli Foreign Service in 1995. She has served at Israel’s embassies in the Philippines and Turkey. Since 2009, she has been a political advisor to the Israeli foreign minister. Frank Arnauts (b. 1962) holds a degree in Eastern philology and history and joined Belgium’s Foreign Services in 1990. He has worked for his country’s embassies in Nigeria and Australia, as well as for Belgium’s offices at NATO and the EU.

Society Inga Žolude wins EU Prize for Literature Latvian prose writer Inga Žolude has been chosen for the 2011 European Union Prize for Literature for her collection of stories Mierinājums Ādama kokam (A Solace for Adam’s Tree). The 12 winners of the 2011 European Union Prize for Literature, which recognizes the best new or emerging authors in the EU, were announced at the Frankfurt Book Fair on October 11. Each winner gets € 5,000 and the opportunity to have their book translated into other languages to boost its cross-border appeal. Among the winners are authors from Bulgaria, Czech Republic, Greece, Iceland, Latvia, Liechtenstein, Malta, Montenegro, Netherlands, Serbia, Turkey, and United Kingdom. The European Union Prize for Literature is organized by the European Commission, the European Booksellers' Federation, the European Writers' Council, and the Federation of European Publishers. The competition is open to the 36 countries involved in the EU Culture Program (27 Member States, Bosnia-Herzegovina, Iceland, Liechtenstein, Norway, Croatia, the former Yugoslav Republic of Macedonia, Montenegro, Serbia, Turkey). Each year, national juries in 12 of the participating countries nominate the winner authors, so that all countries in the program are represented over a three-year period. This year's winners will be presented with their awards at a ceremony in Brussels on November 28. Mierinājums Ādama kokam is Inga Žolude's (b. 1984) second book, published by Dienas Grāmata in 2010.

Latvian Writer Juris Zvirgzdiņš Among Nominees for Astrid Lindgren Memorial Award Latvian writer Juris Zvirgzdiņš was one of 184 candidates from 66 countries nominated for the Astrid Lindgren Memorial Award 2012. 13

Also on the list are four Estonian writers: Andrus Kivirähk, Regina Lukk-Toompere, Aino Pervik, and Leelo Tungal. “It is very gratifying that the number of nominated candidates and countries represented continue to increase,” said the chairman of the Astrid Lindgren Memorial Award jury, Larry Lempert. “The jury is full of enthusiasm for the exciting and difficult task to consider the work of so many qualified candidates.” The recipient or recipients of the Astrid Lindgren Memorial Award 2012 will be announced on March 20 in Vimmerby, the birthplace of Astrid Lindgren. In 2012 the Astrid Lindgren Memorial Award will be presented for the 10th time. The 2011 Award recipient was Shaun Tan (Australia). The Astrid Lindgren Memorial Award (ALMA) is the world’s largest prize for children’s and young adult literature. The award, which amounts to SEK 5 million, is awarded annually to a single recipient or to several. Authors, illustrators, oral storytellers, and those active in reading promotion may be rewarded. The award is designed to promote interest in children’s and young adult literature, and in children’s rights globally. An expert jury selects the winners from candidates nominated by institutions and organizations worldwide. The ALMA is administered by the Swedish Arts Council.

Audiences Vote for the Best in Latvian Theater In keeping with what is now considered a fall tradition, Nordea Bank has organized a nationwide poll for Latvian theater audiences, asking them to name their favorites for the annual Spēlmaņu Nakts Award in three categories: Actress of the Year, Actor of the Year, and Dramatic Production of the Year. The vote's final day will be November 21. Nordea is the proud sponsor of Spēlmaņu Nakts, and this is the fourth year it has held an audience vote. Over 15,000 voted last year, and the more voters, the bigger the prize purse for the winners. Theatergoers can cast their votes via SMS or at www.spelmanunakts.lv. Participants automatically take part in a lottery, where 40 tickets to top Latvian theater shows are up for grabs. 11 theaters nationwide and the largest Nordea Bank branches will have informative display stands on this year's nominees. The star-studded Spēlmaņu Nakts 2010/2011, or Night of Players, will be held the evening of November 23 in the Mikhail Chekhov Rīga Russian Theater.

THE LATVIAN INSTITUTE The Latvian Institute promotes knowledge about Latvia abroad. It produces informative materials and works closely with international media professionals in developing a wide variety of communications projects. Contacts: Pils iela 21 Rīga, LV – 1050, LATVIA Phone: (+371) 67503663 Fax: (+371) 67503669 Email: [email protected] Web: www.li.lv Twitter: www.twitter.com/LatviaInstitute

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