LATVIA IN REVIEW November 22 – 28, 2011 Issue 47

CONTENTS

Government Chairperson of Latvia’s Finance and Capital Market Commission Resigns International Donors Unlikely to Insist on Larger Consolidation in 2012 Budget Latvian PM Dombrovskis Assesses His Government’s Work Positively Dombrovskis Postpones Visit to , Discusses Snoras/Krājbanka By Telephone Latvia to Ask Sweden to Help Recover Latvian Savings Money Latvian Authorities Seize Cars, Home of Ex-Owner of Lithuania's Snoras Bank Police Starts Criminal Proceedings Over Situation at Latvian Savings Bank

Economics Unity Party Sets Goal to Make Latvia the Baltic Leader in Economic Growth in 3 Years 99.8% of Latvijas Krājbanka Customers Will Get Back Their Deposits at Full Amount State Treasury Prepared to Lend EUR 285 Million for Latvijas Krājbanka Payouts Bank of Latvia Economist: Latvia Steps Down as “Champion” in EU Unemployment Bank of Latvia: Business Lending Stabilizing, Yet Overall Money Supply Stagnating

Foreign Affairs Czech Ambassador, Foreign Minister Rinkēvičs Speak about Enhancing Economic Cooperation Rinkēvičs: Baltic Cooperation Must Be Continued, Respecting National Interests Swedish Ambassador, Rinkēvičs Discuss Visit to Latvia by Sweden’s Foreign Minister Hungarian Ambassador, Rinkēvičs Agree on Need to Strengthen Economic Cooperation Foreign Minister Rinkēvičs: Latvia is Prepared to Share Reform Experience with Egypt Belgian Ambassador, Rinkēvičs Discuss Strengthening Political Dialogue Latvia to Abstain in UN Votes on Palestine Unless EU Agrees on Common Position Finnish Ambassador, Rinkēvičs: a Sense of Regional Belonging Should Be Strengthened Foreign Minister Rinkēvičs: Latvia wants Germany’s Support in Debate on EU Finances

Society Annual Latvian Theater Awards Presented New Exhibition of Latvian Decorative Arts and Design in Rīga Latvian Soprano Maija Kovaļevska to Perform La bohème at Wiener Staatsoper Latvian Radio Choir and Sinfonietta Rīga to Record the Music of Arvo Pärt German Journalist Publishes Book on History of the Baltic States

Articles of Interest Latvians Online: “There’s a Latvian App for That” The Economist: “Red Litas Day: A Bust Bank in Lithuania Sparks Worries in Latvia” NPR: “Tough Times Spark Russian Resurgence in Latvia”

Government Chairperson of Latvia’s Finance and Capital Market Commission Resigns On November 28, Irēna Krūmane, the chairwoman of Latvian financial watchdog the Finance and Capital Market Commission (FKTK) decided to resign from her post, the Baltic News Service reported. “I have made a decision to resign as I believe that tension caused by my staying in this office only interferes with appropriate performance of the FKTK and any political discussion (the 1

planned extraordinary parliament meeting) slows down stabilization of the sector,” she was quoted as saying. “I believe that the active measures taken by the FKTK upon detecting a possible financial crime were aimed at preserving the bank’s assets to protect interests of depositors, and there are no grounds to accuse the FKTK of omissions. As the FKTK chairwoman I have always done my best to ensure immediate response to any significant flaws in the FKTK performance and I hope that other members of the FKTK council carry out their duties with equal sense of responsibility,” Krūmane was quoted as saying. FKTK spokeswoman Anna Dravniece told BNS that a letter of resignation would be submitted to the parliament on Monday, November 28, along with a request to accept the FKTK chairwoman’s resignation effective Tuesday, November 29. Dravniece told BNS that Krūmane would continue in the office until the parliament officially accepted her resignation in the due procedure. BNS reported that previously Krūmane was evasive about the possibility of resignation, saying that the FKTK would have its hands full in relation to the situation with Latvijas Krājbanka. According to BNS, the parliamentary faction of the ruling nationalist conservative National Alliance previously called on Krūmane to resign as the FKTK chairwoman. “The National Alliance faction believes that the current developments in Latvijas Krājbanka must be put down to the regulator's bank supervision policy, which has not been improved since the Parex Bank crisis [in late 2008],” the National Alliance board member Jānis Tomelis was quoted as saying. But the two other ruling coalition parties did not supported the position of the National Alliance. FKTK council member Jānis Placis already announced his resignation on November 25, but it had been agreed that he would stay on and help deal with the crisis therefore his resignation would take effect on January 1, 2012, BNS reported. The Rīga-based newswire previously reported that Krūmane was appointed as the FKTK chairwoman on April 28, 2008. In the past, she has been the Finance Ministry State Secretary and the head of the State Treasury, a board member and a vice-president at Baltijas Tranzitu Banka (Baltic Transit Bank), and a board member at Hansabanka (now Swedbank) in Latvia. FKTK, founded in July 1, 2011, is responsible for supervision of , credit unions, insurance companies, insurance brokers, players of the financial instruments market, and private pension funds in Latvia.

International Donors Unlikely to Insist on Larger Consolidation in 2012 Budget On November 28, Latvian Finance Minister Andris Vilks said he doubts very much whether international donors would insist on larger consolidation in the 2012 national budget in relation to the collapse of Latvijas Krājbanka (Latvian Savings Bank), the Baltic News Service reported. According to the Rīga-based newswire, Vilks told the press that payment of guaranteed compensations to depositors of Latvijas Krājbanka would increase the budget deficit this year but it was vital not to put off the payouts till next year as it would have negative effects on the 2012 budget. “I doubt very much whether it [larger budget consolidation] will be required,” he was quoted as saying. Vilks told BNS that payment of guaranteed compensations to depositors of Latvijas Krājbanka will be held this year and under this year’s budget. Revenues to this year's budget, most believably, will be bigger than planned because of the very good economic growth and will reduce the budget deficit, BNS reported. According to BNS, the government is currently working on the 2012 draft budget. On November 15, the Latvian government agreed on additional consolidation measures worth 29 million lats (EUR 41.26 million) in the national budget for 2012 and submitted them to the

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international donors for review. The total amount of consolidation planned in the 2012 budget is 156 million lats (EUR 221.96 million). BNS also reported that the Latvian State Treasury will grant a loan up to 200 million lats (EUR 284.6 million) for payment of guaranteed compensations to depositors of the troubled Latvijas Krājbanka (Latvian Savings Bank), the Cabinet agreed at an extraordinary meeting on Monday, November 28. The newswire had previously reported that on November 21 the FKTK decided to suspend Latvijas Krājbanka from provision of all . The decision has been made due to a shortage of assets discovered at the bank, the watchdog was quoted as saying, adding that the Prosecutor General's Office had been notified about it. The State Police has launched a criminal procedure concerning the situation at Latvijas Krājbanka.

Latvian PM Dombrovskis Assesses His Government’s Work Positively Latvian Prime Minister Valdis Dombrovskis assessed the current government's work positively and hopes that ambitions and disagreements of political parties will not interfere with the government's work, the Baltic News Service reported. According to the Rīga-based newswire, Dombrovskis at the congress of the ruling Unity party on Saturday, November 26, said that the coalition formation process had been unexpectedly hard, but the new government is one of the most professional ones after restoration of Latvia's independence. “As I have underscored earlier, I have not experienced such complicated and unexpected government formation process before. Nevertheless, if we look at it from the point of view of the achieved results, this is one of the most professional governments Latvia has had since restoration of independence,” Dombrovskis was quoted as saying. According to BNS, Dombrsovskis underscored that the new Cabinet of Ministers is a modern, European, and professional government that has many important medium-term and long-term development issues on the agenda: to ensure Latvia's economic growth, develop production and exports, attract investments, create new workplaces, improve the demographic situation, reduce emigration, elaborate the National Development Plan, hold talks about the European Union (EU) financial perspective for 2014-20, and others. “A month has passed since the new government has been formed and the first impressions about the team of ministers are positive. I hope that ambitions and disagreements of political parties will not interfere with the work of the new government and coalition,” Dombrovskis was quoted as saying.

Dombrovskis Postpones Visit to Lithuania, Discusses Snoras/Krājbanka By Telephone Considering the decision of Lithuanian Central bank that was taken in the evening of November 24 to liquidate the nationalized bank Snoras, Prime Minister of Latvia Valdis Dombrovskis postponed his visit to Lithuania on Friday, November 25, when a meeting with Prime Minister of Lithuania Andrius Kubilius was scheduled. On the morning of November 25, both Prime Ministers conversed over the telephone to discuss present situation concerning Snoras and Latvijas Krājbanka. The Lithuanian Prime Minister informed his Latvian colleague about the reasons for the Central Bank's decision. One of the main reasons is the deficit of large amounts of finances in the bank. The Latvian Prime Minister expressed his regret that, in the light of new information about the bank’s actual situation, Lithuanian institutions were not able to find a solution to stabilize Snoras. Dombrovskis also informed his Lithuanian colleague about postponing his visit until mid- December and staying in Latvia to address the situation with Latvijas Krājbanka. On November 25 at 10.00, Prime Minister Dombrovskis called for an operative meeting of government ministers, regulators of financial sector and law enforcement institutions to arrange 3

a plan of action and discuss the propositions of the Finance and Capital Market Commission and the Bank of Latvia concerning the protection of Latvijas Krājbanka client's interests and state interests. On November 25, a visit of the Prime Minister of Latvia, the Head of Finance and Capital Market Commission, as well as representatives from the Bank of Latvia, the Ministry of Economics, and the Ministry of Foreign Affairs was scheduled to the Lithuanian town of Vysaginas to meet Prime Minister Andrius Kubilius and a Lithuanian delegation. The purpose of the visit was to discuss possible solutions to stabilize financial sectors of Lithuania and Latvia concerning bank Snoras and Latvijas Krājbanka, as well as cooperation among the two countries in energy projects, particularly the construction of Vysaginas nuclear power plant.

Latvia to Ask Sweden to Help Recover Latvian Savings Bank Money The Latvian banking regulator, the Finance and Capital Market Commission (FKTK), will ask the Prosecutor General's Office to seek assistance from the Swedish Economic Crime Authority in recovering Latvijas Krājbanka (Latvian Savings Bank) money that Russian businessman Vladimir Antonov, the ex-owner of Lithuania's Snoras bank, has probably invested in his projects, FKTK head Irena Krumane told the Baltic News Service. “FKTK will ask the Prosecutor General's Office to turn to the Swedish Economic Crime Authority with an aim to recover Latvijas Krājbanka money that the Snoras owner might have invested in his projects, including Saab. The Swedish Economic Crime Authority has confirmed its readiness to help recover this money,” Krumane was quoted as saying. According to BNS, FKTK deputy head Janis Brazovskis said in an interview with Latvia's LNT commercial TV channel earlier that 100 million lats (EUR 142 million) worth of Latvijas Kajbanka money, pledged to several foreign banks, was used to raise the bank's equity capital in September, as well as for Antonov's business projects, including his plan to take over Swedish carmaker Saab. According to Swedish media reports, cited by BNS, Antonov had intended to use the money stolen from Snoras and Latvijas Krājbanka to purchase Saab. BNS reported that the suspension of Latvijas Krājbanka operations and the ongoing probe launched by the Latvian law enforcement authorities were caused by suspicions that about 100 lats worth of the bank's assets have been unlawfully pledged to third parties in foreign countries. The newswire previously reported that on November 21, the Latvian financial watchdog, the Finance and Capital Market Commission (FKTK), decided to suspend Latvijas Krājbanka from provision of all financial services. The decision has been made due to a shortage of assets discovered at the bank, the watchdog was quoted as saying, adding that the Prosecutor General's Office had been notified about it. The State Police has launched a criminal procedure in which Russian businessman Vladimir Antonov, who was a council member of Latvijas Krājbanka and controlled the bank through its Lithuanian parent bank, Snoras, has the status of a suspect. The FKTK is also going to submit to the court an insolvency application against Latvijas Krājbanka, probably on Monday, November 28. Snoras was taken over by the Lithuanian government on November 16, BNS reported, acting on the information from foreign sources about a huge shortage of securities in the assets of the bank worth more than one billion litas (EUR 290 million). On November 24 the Lithuanian central bank declared Snoras as insolvent and said it would ask the court to open bankruptcy proceedings against the nationalized bank. Snoras holds slightly more than 60 percent of Latvijas Krājbanka, which ranked ninth among 31 banks in Latvia in terms of assets at the end of September this year, BNS reported.

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Latvian Authorities Seize Cars, Home of Ex-Owner of Lithuania's Snoras Bank In order to recover at least part of the money lost in the closed Latvijas Krājbanka (Latvian Savings Bank), the Latvian State Police have seized 14 luxury cars and a private house in Jurmala owned by Russian businessman Vladmimir Antonov, who used to be the owner of Lithuania’s Snoras bank, the controlling shareholder in Latvijas Krājbanka, the Baltic News Service reported. According to the Rīga-based newswire, Nothing Personal, an analytical news program of Latvia's LTV3 commercial TV channel, reported last Sunday that the law enforcement authorities had seized Antonov’s house and transport vehicles found in Autobaze LVA, or the former governmental car park. The 14 seized vehicles include Aston Martin, Maserati Grand Sport, BMW Alpina Roadster V8, Alfa Romeo Competizione, and Ferrari autos. The vehicles have Latvian, Lithuanian, and Swiss registration plates. The total value of the seized vehicles is an estimated one million euros, according to Nothing Personal. BNS reported that Latvian State Police chief Ints Kuzis told Nothing Personal that most probably charged to be laid against Antonovs will also include leading a company into bankruptcy. The newswire previously reported that on November 21, the Latvian financial watchdog, the Finance and Capital Market Commission (FKTK), decided to suspend Latvijas Krājbanka from provision of all financial services. The decision has been made due to a shortage of assets discovered at the bank, the watchdog was quoted as saying, adding that the Prosecutor General's Office had been notified about it. According to BNS, the State Police has launched a criminal procedure in which Russian businessman Vladimir Antonov, who was a council member of Latvijas Krājbanka and controlled the bank through its Lithuanian parent bank, Snoras, has the status of a suspect.

Police Starts Criminal Proceedings Over Situation at Latvian Savings Bank On November 22, the Latvian State Police started a criminal proceeding over the situation at Latvijas Krājbanka (Latvian Savings Bank), which has suspended provision of all financial services on the orders from the Latvian financial watchdog following troubles at its parent bank, Snoras in Lithuania, the Baltic News Service reported. Laura Pakalne, a spokeswoman for the Latvian Prosecutor’s Office, told the Rīga-based newswire that they had received information from the financial watchdog about Latvijas Krājbanka. The Prosecutor’s Office also confirmed that they were carrying out pre-trial supervision in respect of a criminal proceeding that had been started by the State Police. The Prosecutor’s Office would not disclose any details for now. According to unofficial information obtained by the Panorama news program of the public Latvian Television, cited by BNS, the bank’s top officials have been detained. State Police spokeswoman Lita Juberte told BNS that for now she could not either confirm or deny opening of a criminal proceeding in relation to Latvijas Krājbanka. According to BNS, the Latvian financial watchdog, the Finance and Capital Market Commission (FKTK), late on Monday, November 21, decided to suspend Latvijas Krājbanka (Latvian Savings Bank) from provision of all financial services. The decision has been made due to a shortage of assets discovered at the bank, the watchdog was quoted as saying, adding that the Prosecutor General's Office had been notified about it. The resolution the FKTK had also suspended both the board and the council of Latvijas Krājbanka and had appointed trustees, who had been given the rights of the board and the council to run the bank. According to BNS, on November 17 the FKTK already imposed restrictions on the operations of Latvijas Krājbanka for transactions in the amount exceeding 100,000 euros. The restrictions 5

were imposed, considering developments in the parent bank, Lithuania's Snoras, and their possible implications for the bank's financial stability and solvency, as well as an increased outflow of deposits from the bank, BNS reported. But the latest FKTK resolution has superseded the decision imposing restrictions on the operations of Latvijas Krājbanka. Previously Latvijas Krājbanka was banned from carrying out any transactions worth more than 100,000 euros for its customers but now all payments for the customers have been stopped, BNS said. An announcement about accessibility of the bank deposits will follow. According to the information from the Latvian Association of Commercial Banks, cited by BNS, Latvijas Krājbanka was the sixth largest bank in Latvia in terms of deposits held at the end of September this year. The deposits with Latvijas Krājbanka totalled 586,898 million lats (EUR 835.085 mln) on September 30, 2011, and its market share was 5.2 percent. BNS previously reported that the Lithuanian government on November 16 decided to take over 100 percent of shares in financially troubled Snoras bank, acting on the information from foreign sources about a huge shortage of securities in the assets of the bank worth more than one billion litas (EUR 290 million). Russian businessman Vladimir Antonov used to hold a controlling stake in Snoras which owns slightly more than 60 percent in Latvijas Krājbanka. Latvijas Krājbanka ranked ninth among 31 banks in Latvia in terms of assets at the end of September this year, BNS reported.

Economics Unity Party Sets Goal to Make Latvia the Baltic Leader in Economic Growth in 3 Years During its congress on Saturday, November 26, Latvia’s Unity party adopted a resolution to make Latvia the Baltic leader in economic growth in the coming three years, the Baltic News Service reported. According to the Rīga-based newswire, the resolution described goals in three years to make Latvia one of the first 50 countries in the Global Competition Index. In three years Latvia's position in the UN Human Development Index, and achieve economic and public welfare growth. “Continuing our work in ensuring Latvia's growth and development, we should keep in mind those country's development goals for which we are working -- healthy and educated society, large families secure about their future, well-off and proud people. Latvia should become home for nationals who have gone abroad,” said the resolution. According to BNS, the document said that during formation of the Unity bloc, the highest goal was to make Latvia as a national, European, and democratic country, whose society would be educated, healthy and secure about its future. “In our work we have proved that, when uniting forces, it is possible to achieve much more than alone. As a party we have been able to unite center-right political forces, making the Unity the leader in Latvia's politics. With our work at the parliament, government, Latvian cities and municipalities, we have ensured Latvia's position in Europe among fast growing economies. We have proved that there is force in unity,” said the party's resolution. BNS also reported that Unity's congress was held in the central Latvian town of Tukums, re- electing Solvita Āboltiņa as the board chairwoman, while Sandra Kalniete was elected as the council’s chairwoman. The party will also elect a board of 20 members.

99.8% of Latvijas Krājbanka Customers Will Get Back Their Deposits at Full Amount 99.8 percent of Latvijas Krājbanka (Latvian Savings Bank) customers will receive back their deposits at full amount, said Finance and Capital Markets Commission (FKTK) office head Anna Dravniece, the Baltic News Service reported.

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According to latest information, cited by BNS, 99.8 percent of Latvijas Krājbanka customers have deposits of up to the guaranteed deposit sum, which is 100,000 euros or 70,300 lats, thus the customers will receive their deposits at full amount. Jānis Brazovskis, the deputy chairman of the Finance and Capital Market Commission (FKTK), who has been appointed as the trustee for Latvijas Krājbanka (Latvian Savings Bank) after the watchdog ordered the bank to cease all financial service, promised earlier to recover as many funds for the bank's customers as possible, BNS reported. According to the information provided, cited by BNS, about 350 million lats (EUR 498 million) are to be paid to customers of Latvijas Krājbanka. 150 million lats (EUR 213.43 million) will be used from the Deposit Guarantee Fund, while 200 million lats (EUR 284.57 million) will be borrowed from the State Treasury.

State Treasury Prepared to Lend EUR 285 Million for Latvijas Krājbanka Payouts The Latvian State Treasury is prepared to lend up to 200 million lats (EUR 284.6 million) to cover the shortage in the Deposit Guarantee Fund for payouts to depositors of the troubled Latvijas Krājbanka (Latvian Savings Bank), Kaspars Āboliņš, the head of the State Treasury, told the press on November 25, the Baltic News Service reported. “The State Treasury has sufficient financial resources for this,” he was quoted as saying, adding that the money would be returned to the State Treasury after the bank’s assets were sold as part of the insolvency proceeding. It is going to be a long-term because it was not clear how soon the loan will be repaid, Āboliņš was quoted as saying. According to BNS, the annual interest rate on the loan most probably will be below 2 percent but the exact loan terms are still being negotiated with the Latvian financial watchdog, the Finance and Capital Market Commission (FKTK), the head of the State Treasury was quoted as saying. He said it was impossible that the loan would not be repaid. “If we looked at the amount of assets in possession of Latvijas Krājbanka, it is well above 200 million lats [EUR 284.57 million],” Āboliņš was quoted as saying. According to BNS, FKTK chairwoman Irēna Krūmane also said that a scenario of non-payment was not even being considered. Rather efforts should be made to ensure that other creditors of Latvijas Krājbanka would also be able to recover some of their money, she was quoted as saying. The FKTK is going to submit to the court an insolvency application against Latvijas Krājbanka, most probably, on Monday, November 28, BNS reported. The decision has been made based on the decision by the Lithuanian government not to rescue Snoras bank, the controlling shareholder of Latvijas Krājbanka. Instead, the Lithuanian central bank will seek to declare Snoras insolvent.

Bank of Latvia Economist: Latvia Steps Down as “Champion” in EU Unemployment Latvia is gradually losing its front-runner position in terms of EU unemployment figures, reported Bank of Latvia economist Oļegs Krasnopjorovs. He observed that one-and-a-half years ago Latvia had the highest unemployment rate in the EU, but now, according to the results of the third quarter of 2011, it lags behind Spain, Greece, Lithuania, and Ireland. Krasnopjorovs also noted that in Spain, Greece, and Ireland unemployment keeps growing whereas in Latvia it has been dropping for a year and a half. Writing for the website Macroeconomics.lv, Krasnopjorovs reported that since the beginning of 2010, the actual unemployment or percentage of jobseekers in Latvia has dropped by 6.1 percentage points, to 14.4% of the economically active population and the same trend is supported by the registered unemployment data. He also noted that unemployment is shrinking along with job creation: according to the labor force survey data of the Central Statistical Bureau 7

(CSB), cited by Krasnopjorovs, the number of the employed in the period at hand grew by 68.6 thousand, moreover, the number of people who have a secondary job increased by 3.6 thousand. In his commentary piece for the website, Krasnoprjovs wrote, “These results serve to confirm our forecast at the beginning of the year that the average jobseekers rate would be about 16% in 2011 (the average for the first three quarters is 15.7%). We project the jobseekers rate in 2012 to fall by about one percentage point as compared to 2011.” Krasnopjorovs sees that a more rapid drop in unemployment is hindered by several factors. “First, external economic environment is still highly uncertain. According to business tendency data, employment expectations of businesses that slid into positive territory in spring 2011 (more businesses are planning to increase the number of their employees than are planning to decrease it), dampened substantially in autumn. That reflects lack of confidence regarding expansion of production in an uncertain global environment.” The second reason he cites is as follows: “there is the risk that structural unemployment problem will exacerbate. Currently a pronounced lack of (qualified) labor is being observed only in construction. In October 2011 20% of construction entrepreneurs complained of a lack of labour (CSB data), and 12% considered it the main impediment to business (European Commission data).” The third factor he mentioned is “the scale of a new temporary work program (that as of the beginning of 2012 will partially replace the "100 lats" program) will be smaller than that of the former program; that may dampen the short-time employment opportunities for registered unemployed and thus, worsen employment statistics.” Full text, with references: http://www.macroeconomics.lv/latvia-steps-down-champion-eu-unemployment.

Bank of Latvia: Business Lending Stabilizing, Yet Overall Money Supply Stagnating The improvement of competitiveness of Latvian businesses and the positive export dynamics activated the cooperation between banks and businesses – the balance of loans granted to non- financial enterprises grew for a fourth consecutive month in October, with the increase concentrated in the short-term lats loan segment, reported Bank of Latvia economist Purviņš. Even though the total loan balance still shrank, Purviņš reported, the annual rate of the shrinkage of the banks' loan portfolio was the lowest in the last 13 months (-7.7%). According to Purviņš, “the tense situation in the euro area, as well as the contours of next year's budget, still unclear in October, kept depositors from increasing their savings and the stock of deposits attracted by banks as well as that of the total money supply decreased.” Writing for the website Macroeconomist.lv, Purviņš observed that the stock of loans granted in euros continued to contract, mainly due to housing loan repayments exceeding new issuance, whereas loans granted in lats grew 3.2% and the proportion of lats loans in total loans reached 10%. Purviņš noted that lending in lats was on the rise not only to businesses but also to the household sector, where the balance of loans granted in lats increased. In his commentary piece for the website, Purviņš reported that money indicator M3, which is used to measure the amount of cash and noncash currency in the economy, dropped 1.0% in October, with the annual growth of M3 at 3.4%. He also observed that the balance of domestic deposits attracted by banks decreased by 1.2% in October, “with the lion's share of the decrease on account of a payout of a deposit by a financial intermediary: i.e. a wider trend of decline in deposits has not been observed.” However, while the household deposits with banks decreased slightly, non-financial enterprise deposits increased. “A more optimistic view to the future is overshadowed by economic slowdown risks next year,” Purviņš wrote. “If these risks materialize, income from exports will decline and economic recovery will slow down potentially resulting in a reduction in money supply, including in the amount of total deposits. Deposits are expected to remain stable over the next few months, 8

however, as the desire to increase savings in view of global economic uncertainty and the approaching winter on the one hand and the necessity to pay the increasing bills and ensure payments for imports on the other cancel each other out. The more competitive branches of the economy can expect an ever more substantial inflows of loan resources, as the liquidity of the banking sector remains high and credit institutions find themselves increasingly in need to place their resources in profit-generating projects. An essential precondition for that, however, is reinforcement of macroeconomic stability, successfully wrapping up the drafting of 2012 budget and completing the international loan programme.” Link to full text: http://www.macroeconomics.lv/business-lending-stabilizing-yet-overall-money-supply- stagnating.

Foreign Affairs Czech Ambassador, Rinkēvičs Speak about Enhancing Economic Cooperation On November 28, Foreign Minister Edgars Rinkēvičs hosted an introductory visit from the Ambassador of the Czech Republic to Latvia, Pavol Šepelák. The foreign minister and the ambassador discussed the cooperation to date between Latvia and the Czech Republic. The parties noted that the countries have established a successful political dialogue as well as close cooperation in the field of economy and culture. In recent years an exchange of high level visits has taken place: visits by the Presidents and the Parliament Speakers of both states, a visit by the Czech Foreign Minister. Next year, the cooperation within NATO and the European Union will hold a particular importance. Ambassador Šepelák accentuated that he intended to devote special attention to the enhancement of trade relations and attracting Czech investors. In the ambassador’s opinion, Latvia and the Czech Republic have common political and economic interests, and it is of a vital importance under crisis conditions for the countries to cooperate. Pavol Šepelák succeeds Ambassador Tomáš Pštross. Ambassador Šepel’ák is to make an accreditation visit to Latvian President Andris Bērziņš on November 29.

Rinkēvičs: Baltic Cooperation Must Be Continued, Respecting National Interests On November 25 in Tallinn, Foreign Minister Edgars Rinkēvičs took part in the work of the session of the 30th Baltic Assembly and the 17th Baltic Council. When addressing the participants, the minister accentuated that prerequisites for closer Baltic cooperation and deeper integration with the European Union are a shared vision and practical efforts toward the development of an efficient transport infrastructure and the development of a regional energy market. For the sustainable development of the Baltic states, our region’s transport infrastructure must be included in European transportation networks. Minister Rinkēvičs emphasized that, although it is vital for the Baltic states to cooperate in sectors of strategic importance for the region, they should know how to respect each other’s national interests. While performing his official duties, the minister will make efforts to achieve that this cooperation continues to develop along a mutually beneficial course. The minister also noted that the Baltic states should keep focused on strengthening their economic and financial cooperation, jointly seeking solutions towards an equitable distribution of the EU funding in the EU’s next multiannual budget. The Baltic states must make a joint effort to prevent reduction in cohesion funding and the unfairly low direct payments to Baltic farmers. In conclusion of the Baltic Council, the Baltic foreign ministers held a meeting in order to discuss the matters concerning trilateral and regional cooperation and the topics on the European Union’s and international agenda.

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In 2011, the Presidency the Baltic Assembly and the Baltic Council of Ministers is held by , and next year the function will be taken over by Lithuania.

Swedish Ambassador, Rinkēvičs Discuss Visit by Sweden’s Foreign Minister On November 24, Latvian Foreign Minister Edgars Rinkēvičs met with the Ambassador of Sweden to Latvia, Mats Staffanson, to discuss the visit to Rīga by Swedish Foreign Minister Carl Bildt on November 28. The parties emphasized the intensive Latvian-Swedish political dialogue, a proof to that being a broad exchange of visits high-level. Foreign Minister Bildt’s visit was planned when Rinkēvičs was appointed Foreign Minister. The agenda of the visit includes current issues in bilateral relations, regional cooperation, the European Union’s Eastern partnership, and EU enlargement. The Foreign Minister of Sweden was one of the first among the foreign colleagues to congratulate Rinkēvičs on taking office as Foreign Minister of Latvia.

Hungarian Ambassador, Rinkēvičs Agree on Need to Strengthen Economic Cooperation On November 24, Foreign Minister Edgars Rinkēvičs met with the Ambassador of Hungary to Latvia, Gábor Dobokay. The minister and the ambassador emphasized the active political dialogue and agreed on the necessity to strengthen economic relations between both countries through promoting contacts between small and medium-sized companies and the development of tourism. The ambassador briefed the minister about the plans to enhance cooperation between Latvian and Hungarian towns, as well as to develop educational projects at the level of both higher and secondary schools. Minister Rinkēvičs and Ambassador Dobokay agreed on a continued coordination of positions of both states in such areas of common interests as the EU cohesion policy, the Eastern Partnership, EU enlargement, and security policy in bilateral format and cooperation between the Baltic and Visegrad countries. The minister informed the visitor about Latvia’s preparation for the presidency of the European Union in 2015 and thanked the ambassador for Hungary’s offer to share experience on organizing an EU presidency. The ambassador emphasized that the year 2011 has been significant in the diplomatic relations between Latvia and Hungary, marking the 90th anniversary since Hungary recognized Latvia’s independence and also the 20th anniversary since the restoration of diplomatic relations. On November 23 at the Ministry of Foreign Affairs of Hungary, an exhibition was unveiled dedicated to the anniversary of resuming diplomatic relations between the Baltic states and Hungary. Gábor Dobokay has been Ambassador Extraordinary and Plenipotentiary of Hungary to Latvia since 11 January 2011.

Foreign Minister Rinkēvičs: Latvia is Prepared to Share Reform Experience with Egypt On November 23, Foreign Minister Edgars Rinkēvičs met with the Ambassador of the Arab Republic of Egypt to Latvia, Mohamed Osama Elmagdoub, resident in Stockholm. The parties spoke highly of the friendly relations between both countries and emphasized the necessity to further expand political and economic cooperation. The Foreign Minister of Latvia reminded that the Embassy of Latvia in Cairo was the first diplomatic mission of Latvia on the African continent and called on Egypt to open an embassy in Rīga. The Foreign Minister expressed satisfaction at democratic reforms launched in Egypt and at the same time voiced concern about recent violent clashes in Cairo. The minister called on Egypt to

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continue with a peaceful and open process of transition to a democratic public administration that would end in free and fair elections. Foreign Minister Rinkēvičs emphasized that Latvia has a rich experience of reforms because, when independence was restored in 1991, not only the existing institutions had to be restructured but also new ones had to be set up. The minister indicated that Latvia was ready to share its experience with Egypt and provide support if necessary. As the parties discussed the economic cooperation potential, Minister Rinkēvičs noted that Latvia wished to increase export to Egypt, especially of goods with a high value added. During the meeting, also the current matters of international and regional policy were discussed, including relations with neighboring countries and the situation in Syria, Tunisia and Libya in particular.

Belgian Ambassador, Rinkēvičs Discuss Strengthening Political Dialogue On 23 November, Foreign Minister Edgars Rinkēvičs met with the Ambassador of Belgium to Latvia, Frank Arnauts. Foreign Minister and the Ambassador of Belgium voiced satisfaction at the successful bilateral cooperation and expressed the wish to intensify the foreign policy dialogue both bilaterally and within the format of the Baltic-Benelux cooperation, as well as to strengthen economic relations. Both parties reviewed Latvian-Belgian cooperation within international organizations and the European Union, and in the field of security policy; opinions were also exchanged concerning the developments in Europe and on the international scale. The minister made note of the effective cooperation that has been established between Latvia and Belgian regions and said that this cooperation should be put to a good use also in future, when Rīga and Mons become the culture capitals of Europe - in 2014 and 2015, respectively. While preparing for the European Union Presidency in 2015, Latvia would be interested to tap into Belgium’s valuable experience of organizing a presidency, Minister Rinkēvičs indicated. During the conversation, the Belgian Ambassador outlined the domestic policy issues in the process of the formation of the Belgian federal government and stated the opinion of his country concerning key topics on the European agenda. H.E. Frank Arnauts has been Ambassador of Belgium to Latvia since October 18, 2011. He is a career diplomat and has worked for the Belgian Foreign Service since 1990. Arnauts has served at the embassies in Lagos and Canberra, as well as at the representations to NATO and the EU.

Latvia to Abstain in UN Votes on Palestine Unless EU Agrees on Common Position Latvia will continue to abstain in future votes on the Palestinian Authority's admission to UN bodies unless the EU agrees on a common position, Latvian Foreign Minister Edgars Rinkēvičs told members of the Latvian Parliament’s Foreign Relations Committee, the Baltic News Service reported. “As for issues concerning Palestine and the Middle East peace process, we believe that in order to be an effective player and provide its contribution to the process the EU must speak in one voice. The EU split into three positions [in the vote on Palestine's admission to UNESCO],” the minister was quoted as saying. According to BNS, Rinkēvičs stressed that the EU ought to have a common position and that Latvia abstained because of the lack of such a position. “Latvia will call for a common EU position also in the future, but if there is none, we will abstain,” the Latvian foreign minister was quoted as saying to lawmakers. In October, BNS reported, Latvia abstained during the vote at the UNESCO General Assembly in Paris on Palestine's full membership in the organization, while a majority of states supported the resolution and Palestine was admitted to UNESCO.

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According to the Rīga-based newswire, as many as 107 countries voted in favor of Palestine’s admission to the UNESCO, 14 countries voted against, and 52 countries abstained. At the UNESCO Executive Board meeting on October 5, Latvia already objected to the procedure and voted against sending of the Palestinian application to the UNESCO General Conference, BNS reported.

Finnish Ambassador, Rinkēvičs: a Sense of Regional Belonging Should Be Strengthened On November 22, Foreign Minister Edgars Rinkēvičs received an introductory visit from the Ambassador of Finland to Latvia, Maria Serenius. Both parties spoke highly of the close links and friendly relations between the two countries. The minister and the ambassador shared the opinion that both countries should continue with their active political dialogue, as well as an intensive cooperation in economic matters and the topics on the European Union agenda. Currently Latvia and Finland are equal partners and allies in Europe and have common interests and a shared vision in a number of areas. Joint efforts must also be devoted to strengthening the sense of belonging to the region. One of top priorities in the foreign policy of both Latvia and Finland is the enhancement of Baltic-Nordic cooperation. This year, Finland coordinates the NB8 cooperation format and chairs the Nordic Council of Ministers. Rinkēvičs and Serenius noted with satisfaction in their conversation that Latvian-Finnish economic relations, following a slow-down during the crisis, are currently undergoing a rapid development, and new areas and opportunities for cooperation are being sought. Both sides have shown interest in cooperating in food industry, forest operations, biofuel production, and IT sector. Joint projects in research and innovation also hold a considerable potential. During the meeting both parties discussed the current topics on the EU agenda. Minister Rinkēvičs indicated that Latvia sees Finland as an important ally in negotiations on the EU’s Multiannual Financial Framework for 2014-2020. H.E. Maria Serenius has been Ambassador of Finland to Latvia since September 9, 2008. From 2004 to 2008 Serenius was the Finnish Ambassador to Turkey. Serenius entered the Foreign Service in 1975 and during her diplomatic career has worked at the Consulate General of Finland in the USA, the embassies of Finland in Japan and Egypt, and at the Permanent Mission of Finland to the UN in Geneva.

Foreign Minister Rinkēvičs: Latvia wants Germany’s Support in Debate on EU Finances On November 21, Foreign Minister Edgars Rinkēvičs made on a working visit to Germany. In a conversation with Dr. Guido Westerwelle, Federal Minister for Foreign Affairs of Germany, the Foreign Minister of Latvia commended the excellent political and economic relations with Germany. Minister Rinkēvičs expressed hope that Germany would support Latvia’s efforts to achieve a fair distribution of funding within the EU’s next multiannual budget. “Latvia has undergone a rigorous process of budget consolidation. In this situation the reduction of cohesion funding and direct payments to Latvia would not act as an incentive for others to implement the required financial recovery measures,” Minister Rinkēvičs indicated. The Foreign Minister of Latvia expressed Latvia’s commitment to improving business environment so as to make Latvia more attractive for German investors and investors from other countries. Minister Rinkēvičs will propose that this topic be discussed at one of the forthcoming meetings of the Investor’s Council. Both foreign ministers talked about the conference on Afghanistan to be held on December 5 in Bonn. Ministers Rinkēvičs and Westerwelle agreed that the said conference would have an immense effect on the development of a long-term strategy to stabilize Afghanistan. Concerning this, the Latvian Foreign Minister accentuated the role of the Central Asian states and the need

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to involve these in the regional stabilization process, as well as to implement the so-called New Silk Route economic cooperation project. The ministers also discussed the relations with Russia. Minister Rinkēvičs positively rated the recent dynamics in Latvian-Russian bilateral contacts and expressed Latvia’s readiness also in future to constructively address the relations between the states, both on a bilateral basis and as part of the EU-Russia and NATO-Russia cooperation. Ministers Rinkēvičs and Westerwelle exchanged opinions on the processes in the euro zone. The German Foreign Minister called for support to the required amendments to the EU Treaties targeted at carrying out further measures of economic growth and financial stability. The Latvian Foreign Minister noted Latvia’s determination to meet the criteria for accession to the euro zone by 2014. “At the same time it is important that no political obstacles are put in the path of introducing the euro,” the Latvian Foreign Minister said. Rinkēvičs also indicated that the introduction of financial recovery measures in the EU must not create “multi-speed” groups of EU member states. The Foreign Minister of Latvia thanked Germany for its consistent contribution to the Baltic airspace patrolling and, in view of the forthcoming NATO Summit in Chicago in May 2012, invited to support a permanent solution for a continued patrolling in the Baltic states airspace following 2014. “Such an approach would fully comply with the Smart Defence concept,” concluded Minister Rinkēvičs. The Foreign Minister of Latvia invited his German colleague to the traditional meeting of the Baltic and German foreign ministers to be organized in Latvia next year. Minister Westerwelle gladly accepted the invitation. While in Berlin, Minister Rinkēvičs also met with Dr. Christel Happach-Kasan, Chairperson of the German-Baltics parliamentary cooperation group at the Bundestag, and Dr. Christoph Heusge, Foreign Policy Adviser to the Chancellor of Germany.

Society Annual Latvian Theater Awards Presented The Latvian theater honored its best and brightest last night at the annual Spēlmaņu Nakts (Night of Players) Awards. The Pēteris Krilovs-directed adaptation of J.D. Salinger's Franny and Zooey at the National Theater was named Production of the Year. Krilovs took the best director award as well. Selected as Production of the Year of a Latvian Play was Jānis Balodis’s Visi mani prezidenti (All My Presidents), a Dirty Deal Teatro joint project with the National Theater, directed by Valters Sīlis. Actress of the Year went to Liepaja Theater’s Inese Kučinska for three lead roles, but Actor of the Year was won by New Rīga Theater's leading man Andris Keišs for his portrayal of Othello in Māra Ķimele's production of Shakespeare’s classic. Two theater “veterans” were singled out for outstanding performances in supporting roles – Indra Briķe (Daile) and Edmunds Freibergs (National). Two living legends were also honored last night for outstanding achievement in their careers – actress Astrida Kairiša and the former artistic director at the defunct Youth Theater, Adolfs Šapiro. Ballet Artist of the Year went to principal dancer Margarita Demjanoka for two roles. The awards were presented at the recently-renovated Rīga Russian Theater. Theater links: www.dailesteatris.lv www.dirtydeal.lv www.jrt.lv www.liepajasteatris.lv 13

www..lv www.spelmanunakts.lv www.teatris.lv www.trd.lv

New Exhibition of Latvian Decorative Arts and Design in Rīga Between November 17, 2011, and February 5, 2012, the Museum of Decorative Arts and Design in Rīga’s Old Town is presenting an exhibition called Re-novarion, with a wide range of Latvian decorative arts and design items on display. With this exhibition the museum continues the tradition of organizing annual exhibitions of contemporary decorative applied art and design, with the aim of bringing together designers and all artists who work in different decorative applied art disciplines and introducing their artistic viewpoints and artworks about a particular exhibition theme each year. The previous exhibitions, Intimate in Art in 2009 and Art Optimization in 2010, attracted a great of public acclaim. This year’s exhibition is envisaged as an art show that will reflect the main directions, innovations, and phenomena in the fields of Latvian contemporary applied art and design. Its objective is to discover the many-sided creative expressions of the artists and make an attempt to characterize the overall situation in these fields at present. Re-novation includes a multitude of themes and stylistic expressions, application of various technologies and materials; it also will disclose the second life of materials after recycling, showing unconventional approaches and possibilities of repeated material usage. The exhibition will display artworks by renowned artists in the field, as well as students of the Art Academy of Latvia. The visitors have an opportunity to vote for the best work in the show. Link: www.lnmm.lv.

Latvian Soprano Maija Kovaļevska to Perform La bohème at Wiener Staatsoper In early December, the Latvian opera star Maija Kovaļevska will perform the role of Mimi in Puccini's La bohème at the Wiener Staatsoper. Rodolfo will be performed by Ramon Vargas (tenor). The opera feature staging and stage design by . The opera will be staged on December 1, 3, and 7. Later in December, Maija will play the same role in a production directed by Otto Schenk at the Bavarian State Opera. Next February and March the Latvian opera singer will be seen as Micaëla in Bizet’s and as countess Almaviva in Mozart’s . Born in Rīga on September 21, 1979, the Latvian opera soprano Maija Kovaļevska has performed on many of the world’s great opera stages and continues to earn accolades from critics and audiences alike. Links: http://www.maija-kovalevska.com

Latvian Radio Choir and Sinfonietta Rīga to Record the Music of Arvo Pärt The Latvian Radio Choir and Sinfonietta Rīga Chamber Orchestra are visiting Tallinn to make a recording of music by world-renowned Estonian composer Arvo Pärt. The new album will be released by ECM Records. Tõnu Kaljuste will take the helm for a performance of Pärt’s compositions in Tallinn’s St. Nicholas Church. With over ten albums of Pärt’s music already on sale, the ECM record company is a devoted partner of the composer’s works and always records with the most sought-after performers,

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among them Gideon Kremer, Keith Jarret, Heinz Holliger, Swedish Radio Choir, and Estonian Philharmonic Chamber Choir. The Latvian Radio Choir and Sinfonietta Rīga Chamber Orchestra have performed the works of Pärt already twice this year. Arvo Pärt is one of the most prominent living composers of sacred music. For more than 30 years, Pärt has worked in a minimalist style that employs his self-made compositional technique: tintinnabuli. This can be defined as the application of various inversions of a certain chord. Also, it is a word which evokes the pealing of bells, the bells’ complex but richly sonorous mass of overtones, the gradual unfolding of patterns implicit in the sound itself, and the idea of a sound that is simultaneously static and in flux. In association with ECM Records. Links: www.radiokoris.lv, www.sinfoniettaRīga.lv.

German Journalist Publishes Book on History of the Baltic States The image of the Baltic states as a whole is an illusion – there is no Baltics because Lithuania, Latvia, and Estonia have taken each their own road of development, wrote Robert von Lucius, a journalist for the German paper Frankfurter Allgemeine Zeitung, the Baltic News Service reported. According to BNS, the Latvian daily paper Latvijas Avīze wrote on November 26 that von Lucius has written a book in German entitled Drei Baltische Wege: Litauen, Lettland, Estland – zerrieben und auferstanden (Three Baltic Roads: Lithuania, Latvia, Estonia – Trampled Down and Resurrected), describing the recent and older history of the Baltic states. “There is nothing else that has occupied Latvia’s politics and society as much as relations between Latvia and Russia, Latvians and Russians,” the journalist was quoted as saying. According to BNS, von Lucius also said that Latvia more that Lithuania and Estonia is a bridge between the north and the south, the west and the east, and sometimes making it a non-profile country, which still has to look for its road. In his opinion, cited by BNS, Lithuania is still much unclear about its identity, but it cares for what happens in its neighboring countries. “Estonia, meanwhile, is a strong technology nation, looking in the direction of Finland and North Europe. It is more Nordic than Baltic,” von Lucius was quoted as saying. According to BNS, von Lucius also wrote about oligarchs. He explained that Latvia is unique among the Baltic states because of the biggest impact of oligarchs. “Latvia has about three persons who could be called oligarchs by definition. There are no oligarchs in Estonia. Meanwhile, in Lithuania there are much more oligarchs than in Latvia. It means that each oligarch has much less power in his hands,” he was quoted as saying.

Articles of Interest Latvians Online: “There’s a Latvian App for That” http://latviansonline.com/commentary/article/7844/. The Economist: “Red Litas Day: A Bust Bank in Lithuania Sparks Worries in Latvia” http://www.economist.com/node/21540305?fsrc=rss|fec. NPR: “Tough Times Spark Russian Resurgence in Latvia” http://www.npr.org/2011/11/24/141903913/tough-times-spark-russian-resurgence-in-latvia.

THE LATVIAN INSTITUTE The Latvian Institute promotes knowledge about Latvia abroad and works closely with international media professionals in developing a wide variety of communications projects.

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Contacts: Pils iela 21 Rīga, LV – 1050, LATVIA Phone: (+371) 67503663 Fax: (+371) 67503669 E-mail: [email protected] www: www.li.lv Twitter: www.twitter.com/LatviaInstitute

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