LATVIA IN REVIEW October 11 – 17, 2011 Issue 41

CONTENTS

Government Latvia’s New Parliament Fails to Elect Speaker at its First Meeting Members of New Latvian Parliament Sworn In Fate of Latvia’s Would-Be Ruling Coalition Uncertain as 6 MPs Withdraw From ZRP Bērziņš, EP Members Agree on Position in Defending Latvia’s Positions in EU President Bērziņš, Commissioner Piebalgs Discuss EU Financial Issues Dombrovskis and Ilves Agree on EU Budget Priorities Technical Mission of International Lenders Visits Latvia Bērziņš’s Further Approach in Nominating a Candidate to Become Prime Minister President Bērziņš Reinstates Constitutional Law Commission

Economics Bank of Latvia: Current Account Surplus Again in August Bank of Latvia: Registered Unemployment in Latgale Close to Level in 2004 Bank of Latvia: A New Export Volume Record

Foreign Affairs Bērziņš, EU Officials to Work Together on Issues Important for Latvia Bērziņš, EP Chairman Discuss Issues of Importance to Europe, Latvia Foreign Minister Expects Further Positive Steps in Process of EU Enlargement Kristovskis: Opening BEREC Office in Rīga is a Diplomatic Victory for Latvia Foreign Minister: Common Agricultural Policy is Outdated and Must Be Changed Kristovskis in Luxembourg: Cohesion Policy Must Be Growth Instrument for Latvia Kristovskis Stresses Necessity for Strategic View on EU Relations with Belarus, Ukraine Secretary of State Calls on Brazil to Open Embassy in Latvia President Bērziņš Accredits Lithuanian, Brazilian Ambassadors

Society Latvian Opera Star Marina Rebeka to Debut at New York’s Metropolitan Opera Latvian Conductor Wins 2011 Baltic Assembly Prize in Arts Six Latvian Poets Present their Works in the UK

Articles of Interest Bloomberg: “Zatlers Party Calls for Pause in Latvian Government Negotiations” Bloomberg: “Latvia’s Dombrovskis to Return as Premier After Coalition Accord”

Government Latvia’s New Parliament Fails to Elect Speaker at its First Meeting The new Latvian parliament failed to elect a speaker and members of the parliament presidium at its first meeting on Monday, October 17, and adjourned until Tuesday, the Baltic News Service reported. According to the Rīga-based newswire, the parliament will meet again at 9 a.m. on Tuesday, October 18, to attempt to elect the speaker and the presidium. BNS reported that, contrary to earlier promises, the new Latvian parliament on Monday failed to approve the country‟s ex-president, now the leader of the centrist Zatlers (ZRP), Valdis Zatlers, as the parliament speaker. 1

The center-right Unity, the ZRP, the nationalist conservative National Alliance, and the six lawmakers who recently withdrew from the ZRP, previously said they had agreed to support election of Zatlers as the parliament speaker. However, BNS reported, Zatlers failed to receive a majority of votes in both rounds of voting therefore new candidates will have to be proposed. According to BNS, the only candidate nominated so far is Andrejs Klementjevs, who used to be the vice-speaker in the previous parliament. He was nominated as the speaker by his party, the leftist pro-Russia Harmony Center, which received the largest number of votes in the snap elections.

Members of New Latvian Parliament Sworn In The new Latvian parliament was sworn in on Monday, October 17, as MPs pledged to perform their office duties as best as they can, the Baltic News Service reported. According to the Rīga-based newswire, after taking the oath of office the lawmakers also approved the parliamentarians' mandates. All 100 members had arrived for the first session of the new Latvian parliament, elected in snap elections on September 17, 2011. Each MP signed under the oath of office. BNS also reported that according to the official results of the snap elections, leftist pro-Russian Harmony Center has won 31 mandates in 100-member Latvia parliament; the newly-founded centrist Zatlers Reform Party (ZRP), 22 mandates; the center-right Unity bloc, 20 mandates; the nationalist conservative National Alliance, 14 mandates; and the center-right Greens and Farmers Union (ZZS), 13 mandates. According to BNS, the Harmony Center received 259,930 votes, or 28.362 percent in the snap elections; the ZRP got 190,856 votes, or 20.825 percent; the Unity received 172,563 votes, or 18.829 percent; the National Alliance received 127,708 votes, or 13.880 percent; and the ZZS received 111,957 votes, or 12.215 percent. A total of 13 political parties and blocs ran in the snap elections, BNS reported, but no other parties were able to cross the statutory 5-percent barrier in elections in Latvia. The September 17 early general elections had to be organized because the Latvian citizens in a referendum on July 23 supported the presidential initiative for dissolution of the current parliament.

Fate of Latvia’s Would-Be Ruling Coalition Uncertain as 6 MPs Withdraw From ZRP The fate of Latvia‟s would-be ruling coalition has become uncertain as six lawmakers on October 16 announced their decision to withdraw from the centrist Zatlers Reform Party (ZRP), which means that the planned tripartite coalition would have only 50 votes in the 100-member parliament, the Baltic News Service reported. According to the Rīga-based newswire, six ZRP lawmakers – Klāvs Olšteins, Elīna Siliņa, Gunārs Rūsiņš, Jānis Upenieks, Viktors Valainis, and Jānis Junkurs – on Sunday released a statement saying they had decided to withdraw from the ZRP due to undemocratic decision- making within the party and lack of trust among the ZRP members. Olšteins told BNS that the group would nevertheless support the new government to be headed by , a representative of the center-right Unity bloc, who is the prime minister in the outgoing Latvian government. “We guarantee support to Valdis Dombrovskis as the prime minister both in the process of formation of the government and during the government‟s term,” Olšteins was quoted as saying. Mārtiņš Panke, a spokesman for Dombrovskis, told BNS that Dombrovskis was meeting with representatives of the ZRP and the lawmakers, who have quit the ZRP, on Sunday to find out how this would affect the would-be ruling coalition that ZRP, Unity, and the nationalist conservative National Alliance agreed to form a week ago. BNS reported that such a coalition

2

would have 56 votes in the 100-member parliament, but after withdrawal of six lawmakers from the ZRP the would-be coalition is formally left with just 50 votes. “We need to understand how this will influence also the distribution of responsibilities in the new coalition,” Panke was quoted as saying. According to BNS, Dombrovskis wants to understand how the renegade lawmakers planned to support the new government, how it fitted with the model of the new coalition, and what were the terms for this support. BNS also reported that Latvian President Andris Bērziņš said previously that he could nominate outgoing Prime Minister Valdis Dombrovskis for his third term as the head of the Latvian government, provided that he managed to secure a majority of votes in the new Latvian parliament.

Bērziņš, EP Members Agree on Position in Defending Latvia’s Positions in EU Meeting with Latvian members of the European Parliament on October 12, President Andris Bērziņš and the MPs exchanged views about Latvia‟s most important issues in the context of the next EU financing period, solutions to problems in the euro zone, as well as co-operation among the Baltic states on infrastructural and energy projects. All of Latvia‟s MEPs agreed that the EU‟s current proposal on direct agricultural payments is unacceptable and is based more on political than on economic thinking. They added that it is important for Latvia to present maximal demands in support of its position and to work with the other Baltic states to ensure that these demands are satisfied. In terms of the future of the Cohesion Fund, Latvia is threatened by a 20% cut in financing at a time when the total financing in the fund is to be increased by 8%. That is an obviously unfair solution, and all Latvian MEPs oppose it. They called on President Bērziņš to continue his active negotiations in Brussels and thanked him for what he has already achieved. The MEPs also said that the President‟s presence at negotiations in Brussels is very important, because it only serves to strengthen the views and positions which are presented by the MEPs. The MEPs also said that the cut in Structural Fund financing for Latvia is unjustified because the country has trimmed its budget deficit and fulfilled its international obligations while, at the same time, successfully absorbing EU funds. Latvia is by no means among those EU member states in which the tempo at which funding is absorbed is slowest. In discussing infrastructure and energy projects, the ones identified as the most important ones are the Rail Baltic 2 project and the construction of a liquefied natural gas terminal. President Bērziņš said that in both cases the EU must present a clear position on co-financing, because otherwise Latvia would have no economic reason to decide on the country‟s participation in the projects. Bērziņš also feels, however, that these are essential projects for Latvia in terms of future perspectives, and so the implementation of the projects must be evaluated in a way that is politically responsible and economically objective. All of the participants in the discussion agreed that Latvia must satisfy the Maastricht criteria and do everything to prepare to join the euro zone as planned. At the same time, however, they also agreed that Latvia must monitor the development of the financial situation in the EU. The MEPs who took part in the meeting with the President were , Sandra Kalniete, Krišjānis Kariņš, Aleksandrs Mirskis, Alfrēds Rubiks, Inese Vaidere, Tatjana Ždanoka, and Roberts Zīle.

President Bērziņš, Commissioner Piebalgs Discuss EU Financial Issues Latvian President Andris Bērziņš was in Brussels on October 12 to meet with the European Commission‟s development commissioner, Andris Piebalgs, for a discussion about the EU‟s next financial period, as well as other issues that are of importance to Latvia and the Baltic states –

3

higher direct payments in agriculture, as well as basic conditions related to the Union‟s cohesion policies during the next financing period. Commissioner Piebalgs said that negotiations on finances have not yet begun, and it is not yet known how much money there will be in the overall budget. At the same time, however, there is no likelihood that there will be radical changes related to the EU‟s Structural Funds and its Common Agricultural Policy. President Bērziņš said that it is fundamentally important for Latvia to identify the principles that will allow it to defend its position in negotiations with relevant EU officials and institutions. He added that as President, he will continue to be active in defending Latvia‟s position, seeing this as one of his most important duties. Piebalgs said that it is very important for Latvia to emphasize its thinking when discussing issues with EU institutions and other EU member states, particularly the presiding country of the EU. On January 1, 2012, the presidency will shift from Poland to Denmark. In discussing goals related to Structural Funds, Bērziņš and Piebalgs agreed that it is of primary importance to develop a strategy for the use of the funds – something which no EU member state has done so far. This would provide Latvia‟s economy with an effective impulse for ongoing and sustainable development. The President pointed out that it is not justified to set the level of Structural Fund financing at 2.5% of GDP, because poorer countries receive less money in that case. This is a priority for Latvia in negotiating about the next financial period. Bērziņš also said that Latvia, as a country which has absorbed funding quite successfully while, at the same time, reducing its budget deficit, clearly has good reason to defend the idea that it is not acceptable to reduce Cohesion Fund financing. At the conclusion of their meeting, the two officials discussed the situation in the euro zone, where various problems continue to persist. The current situation does not provide specific solutions to the problems, tough the EU has already implemented strict sanctions against those member states which fail to observe the Maastricht criteria. Commissioner Piebalgs pointed out that EU member states are increasingly seeing Latvia as a positive example of overcoming the crisis, particularly when taking into account the economic and financial problems which have beset several countries in the euro zone.

Dombrovskis and Ilves Agree on EU Budget Priorities Today, on October 11, Latvian Prime Minister Valdis Dombrovskis met Estonian President Toomas Hendrik Ilves to discuss the most important developments in cooperation between the two countries, including the situation in the eurozone, the implementation of cross-border transportation networks, as well as agreed on common priorities of Latvia and Estonia in the context of the European Union‟s (EU‟s) next budget for 2014-2020. Both Latvia and Estonia are interested in more rapid adjustment of direct payments for farmers to prevent the current situation that the amount of direct payments received by both countries is among the lowest in the EU. Both leaders viewed this situation as unfair as well as the European Commission‟s proposal to set the ceiling for the cohesion funding in the next multi-annual budget that would substantially reduce the amount of the cohesion funding available for the Baltic States. Dombrovskis and Ilves agreed that such condition contradicts the objective of the cohesion policy - to promote the development of the poorer regions to reduce disparities. The officials also agreed that the Baltic countries should jointly defend their interests, in cooperation with other like-minded countries. The President of Estonia emphasized that Estonia assigns importance to the implementation of the cross-border connection projects, particularly the Rail Baltica project. Estonia considers the development of transport connections with Europe as an important strategic priority, said T.H. Ilves. The President of Estonia stressed the need to decisively progress in the implementation of these projects, making use of current circumstances when they are given a priority at the EU

4

level. Dombrovskis expressed Latvia‟s interest to continue participation in these projects, pointing to the need to identify all available sources of funding, including from the EU funds. Ilves emphasized that despite some current difficulties in the eurozone countries, in the long term, it is more advantageous for Latvia, Lithuania, and Estonia to be in the eurozone than outside it and, therefore, Estonia supports Latvia‟s progress towards introduction of the single European currency. Dombrovskis confirmed that Latvia will respect the Maastricht criteria in drafting of the 2012 budget to introduce the euro on January 1, 2014. The President of Estonia and the Prime Minister of Latvia also discussed current developments in the interior policy of the two countries. Ilves congratulated Dombrovskis on the progress in developing the coalition model and expressed his hope to continue the close cooperation. Dombrovskis, in turn, congratulated Ilves on the re-election to the post of the President of Estonia for the second term and appreciated the fact that the President had chosen Latvia as the destination for his first foreign visit. Trade and investment indicators of Latvia and Estonia: In 2011, Latvia‟s exports to Estonia continue to increase. Export increase compared to Q2 of 2011 is 43%. Import indicators from Estonia also show a positive trend. The increase in imports in the first half of 2011 compared to Q2 of 2010 is 20%. In the first half of 2011 Estonia was the second largest export partner and the fifth largest import partner of Latvia after Lithuania, Germany, Russia, and Poland. Estonia is the second largest investor of Latvia according to investment volume. According to the information of the Bank of Latvia, in Q2 of 2011 the Estonia‟s direct investment in Latvia amounted to LVL 893.8 million (EUR 1271.77 million). Latvia‟s direct investment in Estonia in Q2 of 2011 amounts to LVL 45.4 million (EUR 64.59 million), thus ranking it in the third place. Photo of the meeting: http://www.flickr.com/photos/valstskanceleja/sets/72157627869630124/ Transcript of press conference with Latvian President Andris Bērziņš and Estonian President Toomas Hendrik Ilves: http://www.president.lv/pk/content/?cat_id=605&art_id=18590.

Technical Mission of International Lenders Visits Latvia From October 3-11, the technical mission of international lenders (International Monetary Fund, European Commission) visited Latvia to prepare for the last review mission which is scheduled for October 26 through November 7. The mission met government representatives and experts of the line ministries. Representatives of the technical mission of international lenders gave a broadly positive assessment of economic indicators achieved as a result of fiscal consolidation after budget amendments, as well as expressed affirmative future forecasts for the Latvia‟s economic development. While doing its preparatory work, the technical mission discussed with government representatives and experts of line ministries the medium-term macroeconomic development forecasts and trends for 2012, preparation of the next year‟s budget, as well as other important issues like this year‟s budget execution and progress on the Fiscal Discipline Law. It should be noted that this mission is not expected to make any particular decisions. Decisions on the issues that are the most important for Latvia will be discussed during the review mission at the end of October and beginning of November. The most important task for the review mission of international lenders will be to agree on the state budget for 2012 and potential amount of fiscal consolidation as appropriate, as well as to persuade representatives of the IMF and EC about sustainability of the Latvian economic growth, i.e., efficiency of combating the shadow economy and the need to take into account resulting positive effects of economic recovery while drafting the state budget.

5

As usual by the end of the Review mission a Letter of Intent to the International Monetary Fund and Memorandum of Understanding with the European Commission will be signed. The society will be informed about the decisions made during the review mission. The Ministry of Finance reiterates that according to the agreement with international partners the international loan program will be closed on December 22, 2011. About the international loan: The international loan program for Latvia was planned in amount of 7.5 billion euro. In the view of facts that the economic and financial situation in the state has improved, Latvia does not need to utilize the full amount of the loan. By now Latvia has used 4.4 billion euro. Latvia is going to repay the received funding by refinancing the government debt on the international financial market. In June 2011 Latvia returned successfully to international financial markets by issuing bonds worth USD 500 million. This emission proved Latvia‟s ability to finance budget needs on its own and put safe basis for successful refinancing of loans in coming years on public financial and capital markets. In the future it is also planned to organize annual emissions of public national debt securities and diversify the investor base as a priority (in Europe, United States, and Asia). Additional information about the international loan is available on the website of the Ministry of Finance: http://www.fm.gov.lv/?lat/finansu_ministrija/jautajumi_un_atbildes/.

Bērziņš’s Further Approach in Nominating a Candidate to Become Prime Minister One of the fundamental principles in Latvia‟s Constitution is that after a parliamentary election, the country‟s President nominates a candidate for the post of prime minister, who can assemble a majority government. The duty for the President, however, is not to put together a coalition. Parties and alliances which have been elected to the 11th and have confirmed readiness to work in the coalition must agree on fundamental principles of partnership and establish the coalition on that basis. The primary job is to ensure the beginning of parliamentary operations by electing a presidium, setting up committees, and then reaching agreement on a Cabinet of Ministers. According to constitutional tradition, the President names the candidate for prime minister only after the outgoing Cabinet has resigned because of the first meeting of the newly elected Saeima (this year on October 17). None of the parties elected to the Saeima this year has rejected the idea of working in a government led by the current prime minister, Valdis Dombrovskis, and the candidate has received public support from the parties. Despite that fact, however, President Andris Bērziņš will make sure that the official nomination of the head of government is in line with specific prerequisites. To wit, the candidate will be named only if the President has sufficient reason to believe that he or she can put together a coalition model that will take into account all of Latvia‟s international obligations, continue reforms and the country‟s fiscal policies so as to ensure growth and stability, strengthen the principles and values of democracy in Latvia, and not change the country‟s course of development or its fundamental, constitutionally-based values which relate to human rights, a market economy, and membership in the European Union and NATO.

President Bērziņš Reinstates Constitutional Law Commission President Andris Bērziņš decided on October 10 to reinstate the work of the Constitutional Law Commission which operates under the President‟s wing. The membership of the commission will remain the same, and it will be chaired by , a justice on the European Court of Justice and a professor at the Rīga School of Law. Other members of the commission are professionals with practical experience, authority and scholarly work, including work related to an international view – Ineta Ziemele, a justice on the European Court of Human Rights and a professor at the Rīga School of Law, Daiga Rezevska, an associate professor at the Faculty of Law of the University of Latvia, Gunārs Kusiņš, a lector 6

at the Faculty of Law of the University of Latvia, Lauris Liepa, a lector at the Faculty of Law of the University of Latvia, and Mārtiņš Mīts, a lector and the pro-rector of the Rīga School of Law. The President has reinstated the Constitutional Law Commission to get support for the legislative functions that are enshrined for the resident in the Constitution, to offer views about how constitutional norms should be interpreted and improved, as well as to facilitate scholarly research and qualified discussions about important issues of the law. The commission will also have a fundamental role to play in evaluating planned constitutional amendments. The plan is that at its first meeting, the Constitutional Law Commission will discuss its statutes and discuss other important issues, as well.

Economics Bank of Latvia: Current Account Surplus Again in August In August 2011 the current account surplus was at 21 million lats (EUR 29.88 million), reported Bank of Latvia economist Daina Paula. The economist noted that the improvement in the current account balance compared to July was significantly impacted both by the shrinking in the negative trade balance and the inflows of EU funding, which exceeded the levels of the previous two months. Writing for the website Macroeconomics.lv, Paula wrote that as was clear from the external trade data for July, the increase in the imports of the group of mechanical and electronic goods should be considered a separate purchase of investment commodities and in August no trend of increased goods imports developed. “The export value of goods, on the other hand, reached its historic maximum in August after a two-month-long decrease,” Paula observed. “The positive balance of services trade also grew, determined both by a small rise in exports in several groups of services (e.g., travel, financial services and other business services) and a smaller value of financial services received.” In her commentary piece, Paula noted that the shrinkage of the negative balance in the income account to 11.0 million lats (EUR 15.65 million) was primarily the result of a smaller volume of dividends paid compared to previous months, whereas the positive balance of current transfer account increased again due to the funding received from the European Social Fund and European Agricultural Guidance and Guarantee Fund, reaching 52.4 million lats (EUR 74.55 million). “The positive balance in the capital and finance account resulted from the inflows of funding from the EU Cohesion and Regional Development funds and a positive flow of net foreign direct investment ensured both by the reinvested earnings by foreign investors and investments in equity capital. The volume of non-resident deposits also grew,” Paula wrote. The Bank of Latvia economist concluded her piece in Macroeconomics as follows: “A small current account surplus could remain the case in 2011 overall, with the goods and services trade close to balanced and the level of current transfers close to the one in 2010. Several third quarter confidence indicators register a positive or stable dynamic and some Latvian enterprises, with the help of foreign investors, are making rather substantial investments in development; Cohesion fund financing is also available for a successful implementation of infrastructure, transport and energy projects. Lending activity however remains low and there is continued concern regarding a slowdown in external demand. These concerns are likely to slow down imports as well as limit a rise in the negative balance of the profit-and-loss account in the coming periods.” Link to full text: http://www.macroeconomics.lv/current-account-surplus-again-august.

Bank of Latvia: Registered Unemployment in Latgale Close to Level in 2004 In September, the registered unemployment level in Latvia continued to drop, going down 0.2 percentage points and reaching 11.6% of the economically active population by the end of the month, reported Bank of Latvia economist Oļegs Krasnopjorovs. The economist also noted that 7

the number of registered unemployed (131.7 thousand people) is currently one third less than at the peak of unemployment 18 months ago. Writing for the website Macroeconomics.lv, Krasnopjorovs observed that in contrast to the 2010 trend, this year unemployment in Latgale has dropped rather rapidly, shrinking under 20% for the first time in two years and approaching the indicators of 2004. According to the economist, the drop in unemployment was promoted both by the opening of new jobs and gradual restructuring of the “100 lats” program, which probably took away some of the motivation to register with the State Employment Agency (NVA). In his commentary piece for the website, Krasnopjorovs observed that the number of filled vacancies in the first six months of 2011 was up 4.2% year-on-year, which was twice the average increase nationwide (data of the business survey conducted by the Central Statistical Bureau (CSP)). “With the workload growing for those employees for whom it was cut during the crisis, the number of full-time employees in Latgale grew 4.8% in the first six months,” the economist wrote. On the other hand, Krasnopjorovs wrote, cutting the monthly temporary work stipend from 100 to 80 lats as of July of this year, as well as the scheduled completion of the program in November of this year, acted to diminish the motivation of long-term unemployed to register with the NVA. “It is Latgale where the changes in the temporary work program have the most significant effect on registered unemployment – both because it has the greatest percentage of long-term unemployed in Latvia (55% of the unemployed have been registered with NVA for more than a year against the national average of 44%) and because of the small difference between the average salary and the program stipend. The (official) average monthly net salary for full-time work is only a little over 200 lats in the private sector.” The Bank of Latvia economist concluded his piece as follows: “It is possible that introducing the new temporary work program as of 2012, albeit on an estimated 2-3 times smaller scale than the „100 lats program,” will once again raise the motivation to register with the NVA (particularly in Latgale), decreasing the possibility that as early as next year the level of registered unemployment could reach a one-digit number.” Link to full text: http://www.macroeconomics.lv/registered-unemployment-latgale-close-level- 2004.

Bank of Latvia: A New Export Volume Record The foreign trade data for August indicate a rise in export volumes, reaching a new export volume record, reported Bank of Latvia economist Daina Pelēce. The economist wrote that over a month, goods exports grew 13.4% while imports shrank by 1.1%. Writing for the website Macroeconomics.lv, Pelēce noted that differences in the annual growth rate of Latvian goods exports and imports were determined both by seasonality and base effect. “Goods exports have climbed 27.0% over a year,” Pelēce wrote. “As evidenced by manufacturing data, positive indicators were observed in the production of metal products, electronic equipment, non-metal mineral products, textiles as well as wood and wood pulp, and the positive contribution of these branches dominated the annual growth of goods exports.” In her commentary piece for the website, Pelēce observed that in August, exports grew in almost all Latvian export goods groups. “Growth was fastest in the exports of agricultural goods (seasonality), textile materials and products, mineral products, metal products as well as electrical appliances and electronic equipment,” she wrote. “A negative trend has been set by the three- month-long drop in pharmaceuticals exports. A positive development has been the expansion of Latvian entrepreneur exports markets not only on the account of the main groups of export goods but also because the export structure has become more complicated: new groups of commodities have appeared and the small ones have expanded.”

8

The Bank of Latvia economist noted that in the exports of mechanisms and electronic equipment, the proportion of telephones and other data transmission and reception appliances has increased (in 2010, it was 5.7% of the exports of this group whereas in the first seven months of this year, that percentage grew to 11%), and the proportion of mineral fertilizers in chemical exports has grown from 2.2% in 2010. to 5% this year. Pelēce conclude her piece in Macroeconomics.lv as follows: In spite of global developments, Latvian business confidence indicators for the third quarter improved, in contrast to all other EU countries, both in regard to export order volumes and competitiveness evaluations both domestically and in the European Union. That is a clear sign that the exporters are ready to maintain their existing markets even under the conditions of growing competitiveness.” Link to full text: http://www.macroeconomics.lv/new-export-volume-record.

Foreign Affairs Bērziņš, EU Officials to Work Together on Issues Important for Latvia Latvian President Andris Bērziņš met on October 12 for a working luncheon with the president of the European Commission, Jose Manuel Barroso. He also had a bilateral meeting with the EU‟s commissioner for economic and monetary affairs, Olli Rehn. At both meetings, the focus was on the European Commission‟s proposal concerning the next multi-year financial framework, as well as on Latvia‟s most important priorities. President Bērziņš emphasized the fact that of essential importance to Latvia are issues related to the Common Agricultural Policy, direct area payments, as well as the possibility that the total amount of Cohesion Fund financing for Latvia might be cut. The President said that Latvia does not support this, because the proposal is unequal and unjustified. At a news conference after the two meetings, the President said: “We agreed that the EC president and I will look for agreement and constructive solutions to problems, as opposed to a dead end which does not satisfy anyone.” During the discussion about the EU‟s Cohesion Fund, President Bērziņš insisted that the amount of money coming from the fund is of decisive importance in ensuring economic growth in Latvia: “Despite the difficulties caused by the economic crisis, Latvia has successfully absorbed the financial instruments that have been made available to us, and that has helped to warm up the economy during a decline. For that reason, it is important for Latvia to make sure that during the next financial planning period, Cohesion Fund resources are available at a sufficient level and can be used to even out differences in the standard of living in different regions of the EU,” he said. The President added that for this reason, Latvia cannot accept the proposal that Cohesion Fund financing be limited to 2.5% of GDP. Barroso emphasized the need to absorb EU funds successfully and to observe financial discipline in the use of the monies, as well as to be very careful in evaluating the way in which EU funds have an effect on the national economy so as to promote competitiveness and growth. In advance of the discussion about the Common Agricultural Policy after 2014, President Bērziņš presented the EC president with a declaration signed by Baltic farmers who took part in today‟s protest demonstration. The declaration speaks to the need to bring financing for the Baltic States closer to the European level. “In order to compete successfully with food products from other EU member states not just in Europe, but also in Latvia, subsidies must be evened out – those which farmers in different countries receive from the Common Agricultural Policy,” said the President, adding that this is particularly important so as to create jobs and ensure growth in Latvia‟s countryside, thus reducing the number of people who leave rural areas, thus causing negative consequences for Latvia‟s economy and its demographic situation. Bērziņš and Barroso also discussed the stability of the eurozone. President Bērziņš said that Latvia is planning to fulfill the criteria of the Stability and Growth Pact in 2012 so that Latvia might join the eurozone in 2014. Barroso discussed debates about how the stability of the euro 9

zone can be ensured and said that there has been dialogue among commission members on how to promote the coordinated economic administration of the euro zone, as well as those member states which have not yet joined the zone. At a news conference after the working luncheon, Barroso praised Latvia as an outstanding example of how the crisis could be overcome, insisting that right now it is of key importance to maintain economic growth. The EC president also said that during negotiations about the next EU financing period, he will fully take into account Latvia‟s position on those matters which are under debate at this time.

Bērziņš, EP Chairman Discuss Issues of Importance to Europe, Latvia Latvian President Andris Bērziņš met with the chairman of the European Parliament, Jerzy Buzek, in Brussels on October 12 to discuss the situation in the European Union and Latvia. Buzek congratulated the President on his election and said that given the difficult economic situation which exists at this time, it is important for heads of state and leaders of EU institutions to meet as often as possible. He also commended Latvia for the work that it has done to overcome the crisis and said that Latvia can set an example for others. Both officials discussed next year‟s budget forecasts for Latvia and Europe. President Bērziņš expressed his views about the political situation in Latvia and added that the newly elected Parliament will convene for its first meeting next Monday. Bērziņš and Buzek also discussed energy security and independence – something that is of particular importance to the Baltic states. They also talked about the project of building a nuclear power plant at Visaginas and Latvia‟s participation therein, as well as about the development of a project to construct a liquefied natural gas terminal.

Foreign Minister Expects Further Positive Steps in Process of EU Enlargement On October 12, the European Commission has published its regular progress reports on the European Union (EU) candidate countries Croatia, the former Yugoslav Republic of Macedonia, Iceland, Montenegro, Turkey, potential candidate countries Albania, Bosnia and Herzegovina, and Kosovo, as well as launched the communication “Enlargement Strategy and Main Challenges 2011-2012.” Along with the progress reports, the EC has also prepared its opinion („avis’) and an analytical report on Serbia‟s application for the membership of the European Union. In the said documents, the EC analyses the progress that candidate countries and potential candidates have made towards EU accession, as well as formulating recommendations for a further course of the enlargement policy. Latvia commends the annual Enlargement Package drawn up by the EC and the presented analysis of the situation in the Western Balkan countries, Turkey, and Iceland. Latvia also expresses satisfaction with the EC recommendations to launch EU accession negotiations with Montenegro and the former Yugoslav Republic of Macedonia and grant Serbia the status of an EU candidate country. “I hope that all the EU member states will agree with the EC recommendations and further positive steps will be taken in the process of EU integration not only of Serbia but also of other candidate countries and potential candidates,” the Latvian Foreign Minister Ģirts Valdis Kristovskis said. “I expect that after Croatia‟s EU accession agreement is signed this December the process of its ratification in the member states will run smoothly and new EU accession negotiation chapters will be opened with Turkey. It is also high time accession talks were launched with the former Yugoslav Republic of Macedonia,” the Foreign Minister emphasized. Latvia strongly supports a further EU enlargement in the Western Balkans as well as regarding Turkey and Iceland, because Latvia considers that without their accession to the EU a process of the historical unification and stabilization of the European continent cannot be completed.

10

Kristovskis: Opening BEREC Office in Rīga is a Diplomatic Victory for Latvia On October 14, the Foreign Minister Ģirts Valdis Kristovskis will participate in the official opening of the Office of the Body of European Regulators for Electronic Communications (BEREC) in Rīga. The BEREC Office is a recently created European Union (EU) agency and will be the first EU level institution located in Latvia. Regarding this, the Minister Kristovskis emphasizes that the opening of this Office is a great diplomatic achievement of Latvia brought about by an active engagement of high-ranking Latvian officials in cooperation with Latvia‟s diplomats in EU institutions and Member States. “The strong determination of Latvia‟s government to achieve that this EU institution is located in Rīga and the following targeted lobbying in the EU institutions and the Member States done by the Latvian government and the representatives of the foreign service have produced a spectacular result. Locating the BEREC Office in Rīga will not only strengthen the field of electronic communications, but will also promote the decentralization of EU institutions and bring them closer to citizens, and, what‟s more, will also raise Latvia‟s profile on an international scale,” said Ģirts Valdis Kristovskis. The Office of BEREC is responsible for the harmonization of the EU internal market in the field of electronic communications and significantly supports the implementation of the European Digital Agenda thus providing new jobs for Europeans and promoting Europe's global competitiveness in the area of information and communication technologies. The BEREC Office provides expertise and the analysis of the Member States experience thus promoting quality, lower rates and accessibility to the services of electronic communications including the broadband internet and mobile communications. Latvia believes that the development of the sector is important and provides a basis for further progress in economy, social sphere and education. The decision to locate the Office of BEREC in Rīga was taken by the EU Member States on 31 May 2010. High-ranking Latvian officials and the Vice President of the European Commission and European Digital Agenda Commissioner Neelie Kroes will take part in the official opening ceremony of the Office.

Foreign Minister: Common Agricultural Policy is Outdated and Must Be Changed On October 12, the European Commission officially presented the legislative package proposal for the Common Agricultural Policy from 2014 to 2020, including the funding for direct payments allocated to Member States. Minimal changes offered by the European Commission contradict the European objective of becoming a modern and competitive economy. As indicated by Foreign Minister Ģirts Valdis Kristovskis, “the current Common Agricultural Policy in the European Union is based on a slightly adjusted 1990s policy, now obsolete. It is high time this policy is remodelled into a modern community policy in line with contemporary requirements.” To date, the EU agricultural policy concerning direct payments is based on the figures on areas, productivity, and the scope of agricultural products that were true of the situation before Latvia joined the European Union. We believe that the situation has changed both in Europe and the world over and, therefore, it is also necessary to seriously change the EU CAP. The model elaborated by the Ministry of Agriculture of Latvia on setting the payment amount at 80% minimum and 120% maximum of the EU average direct payment level is based on objective and currently existing criteria. Because of this alone the model is better than the “facelift” reshuffling of resources in the EC proposal. Foreign Minister Kristovskis emphasized that “it is not only the question of Latvian farmers receiving more funds. It is the question of how modern and competitive the EU‟s agricultural policy is, how equal the conditions are that this policy creates in the common market and, consequently, what the EU‟s competitive capacity will be on a global scale.” 11

As reported earlier, Latvia‟s focus in negotiations on the European Union‟s multiannual budget framework for 2014-2020 lies on two priorities: first, adequate funding under the Cohesion Policy that will enable Latvia to approach the EU average development level through favorable conditions created for the growth of Latvia‟s economy and infrastructure development; second, achieving fair and equitable competition conditions for Latvia‟s farmers in the common EU market.

Kristovskis in Luxembourg: Cohesion Policy Must Be Growth Instrument for Latvia On October 11 in Luxembourg, Foreign Minister Ģirts Valdis Kristovskis took part in a session of the General Affairs Council at which the Commissioner for Regional Policy, Johannes Hahn, introduced the ministers to the legislative package for the Cohesion Policy from 2014 to 2020 published by the European Commission on October 6. During the debate, Foreign Minister Kristovskis indicated that the Cohesion Policy is an instrument for the growth of Latvia. Therefore, the EC proposal of capping the Cohesion Policy allocations at 2.5% of GDP is unacceptable for Latvia. This would mean that funding available for Latvia is considerably reduced if compared to the currently available allocations under the EU funds. The minister indicated that such a proposal by the EC has neither economical nor logical grounds, given that Latvia has successfully absorbed the EU funding during the current period. The argument applied by the EC concerning the absorptive capacity of certain countries is controversial and cannot be applied to Latvia. The minister accentuated that a member state which has carried out drastic austerity measures, conscientiously complied with the terms of an economic recovery program, and still remains among the leaders as to the absorption of the EU funding should not be punished by reduced support from cohesion instruments. The Council also held an exchange of opinions ahead of the European Council meeting in October. The heads of the state and government of the EU member states are expected, beside a discussion on challenges to tackling the global economic and financial crisis, to focus on growth promotion measures in the member states and in the European Union as a whole. The agenda for the next European Council meeting includes the external aspects of economic policy, aligning the EU position for the upcoming G20 Summit on November 3-4 in Cannes (France) and preparing for the UN Climate Conference in Durban.

Kristovskis Stresses Necessity for Strategic View on EU Relations with Belarus, Ukraine On October 10 in Luxembourg, Foreign Minister Ģirts Valdis Kristovskis took part in a session of the European Union (EU) External Relations Council. The foreign ministers discussed the results of the Eastern Partnership Summit and agreed that the EU‟s cooperation with its Eastern Partnership states should be continued and a road map drawn up in order to deepen relations. The ministers focused in particular on the situation in Belarus and Ukraine. In a follow-up to the Foreign Affairs Council‟s decision of January 31, 2011, stipulating a regular review of the situation development in Belarus, the foreign ministers considered a further EU policy. The ministers agreed that the EU should continue supporting civil society. The Council also decided to prolong the existing restrictive measures and to add some more persons to the list of those targeted by a visa ban. During the debate, the Latvian Foreign Minister supported the demand to release and fully rehabilitate all political prisoners. At the same time, Minister Kristovskis invited his colleagues to work on a broader vision in building relations with Belarus. While discussing the EU-Ukraine relations, the ministers had a common understanding that Ukraine is an important partner to the EU and that negotiations on the Association Agreement should be continued with the aim of completing those by the end of the year. The EU‟s interests lie in a democratic Ukraine founded on the rule of law, human rights, and fundamental

12

freedoms. Those were emphasized as a cornerstone for a further deepening of the relations between the EU and Ukraine. The Council also debated the recent developments in the Middle East Peace Process following the Middle East Quartet statement of September 23 and called on Israel and Palestinians to resume peace talks within a month so as to achieve an agreement by the end of 2012 at the latest. The Foreign Minister of Latvia stressed that a solution to be targeted is a peaceful co-existence of two states that could be achieved only through direct negotiations. The Foreign Affairs Council also held an exchange of views on the current situation in the EU southern neighborhood with a particular focus on latest developments in Egypt, Libya, Syria, and Yemen. In preparation for the next EU-China summit, to be held in Tianjin on October 25, the Council discussed the EU-China relations and the priority of economic cooperation, notably facilitating better access to the Chinese market.

Secretary of State Calls on Brazil to Open Embassy in Latvia On October 10, the Secretary of State of the Ministry of Foreign Affairs, Andris Teikmanis, met with the Ambassador of the Republic of Brazil to Latvia, Leda Camargo, during her accreditation visit to Latvia. Secretary of State Teikmanis noted that the visit to Brazil by Prime Minister Valdis Dombrovskis in July clearly demonstrated the interest of the Latvian government and the business community in expanding relations with Brazil, particularly in the field of transit and logistics, information technologies, and tourism. In addition, in order to dynamize the relations between the countries, the citizens of Latvia should be granted a visa-free entry to Brazil for private visits, business, or tourism. Therefore, the Secretary of State called on the Brazilian side not to delay the completion of the required procedures so that an agreement between the European Union and Brazil on visa waiver for holders of ordinary passports could come into effect. Teikmanis also indicated that visa waiver was Latvia‟s priority at the 5th EU-Brazil Summit on October 4 in Brussels. Secretary of State Teikmanis also said that Latvia supported the Open Government Partnership (OGP) recently launched by US President Barack Obama and Brazilian President Dilma Rousseff. Latvian President Andris Bērziņš took part in the event for the inauguration of the OGP on September 20 in New York. The OGP is a new initiative, which aims at enhancing the dialogue of the public administration with civil society in various formats, including with regard to the availability of social services, fighting corruption, a transparent national budget and use of resources, as well as public and environmental security. Both parties also appreciated the ongoing cooperation within international organizations. In view of the rapidly growing cooperation between both countries, the State Secretary invited the Brazilian Ambassador to consider a possibility that an embassy of Brazil could be opened in Rīga, also given that the Ministry of Foreign Affairs seeks to expand the network of Latvia‟s diplomatic agencies abroad, including Brazil, in order to strengthen cooperation with countries and regions having a considerable economic potential and an increasing influence on international politics. The Foreign Ministry regards educational and cultural cooperation between both countries as successful. During the visit by Prime Minister Valdis Dombrovskis, direct contacts were established between the Rīga Technical University and a number of Brazilian universities. The Rīga Technical University has started setting up a Latvian-Brazil cooperation centre with the aim of promoting academic and business cooperation. To commemorate the 90th anniversary since Brazil recognized Latvia‟s independent statehood, the Honorary Consulate of Latvia in Brazil is planning to present a concert with the participation of Latvia and Brazilian artists. It is also worth mentioning that during the late 1930s and early 1940s, the Legation of Latvia to Argentina, operating from 1935 to 1946, also covered Brazil. 13

The Ambassador of Latvia to Brazil is the Head of the European Union Directorate of the Foreign Ministry, Ambassador Artis Bērtulis, resident in Rīga. The Brazilian Ambassador to Latvia, Leda Camargo, resides in Stockholm.

President Bērziņš Accredits Lithuanian, Brazilian Ambassadors Latvian President Andris Bērziņš issued accreditation on October 11 to Ričardas Degutis, ambassador extraordinary and plenipotentiary of the Republic of Lithuania, and to Leda Lucia Camargo, ambassadress extraordinary and plenipotentiary of the Federal Republic of Brazil. During his meeting with the new Lithuanian ambassador, President Bērziņš said that Lithuania is a close neighbor and one of Latvia‟s main partner countries. He praised the level of open and active political dialogue which exists between the two countries at the highest level. He also expressed his conviction that Latvia‟s newly elected parliament will strengthen cooperation between the two countries. Bērziņš also focused on ways of expanding economic cooperation between Lithuania and Latvia beyond the fact that Lithuania is already Latvia‟s leading partner. He and the ambassador discussed ways of diversifying trade and investments, and Bērziņš said he hopes that Degutis will do everything possible to encourage Lithuanian businesspeople to make investments in Latvia and to develop economic links between the two countries. There was also a discussion about ways in which the two countries can work together at the international level, given that Latvia and Lithuania have similar interests in the European Union. For both countries, further development will depend very much on the conditions which will be included in the EU‟s next budget cycle. The two officials also discussed the need to develop joint energy and transportation projects, particularly in terms of the development of a nuclear power plant at Visaginas. At his meeting with the new Brazilian ambassadress, President Bērziņš talked about ways of making it easier for Latvian citizens to travel to Brazil, emphasizing the need to establish a visa- free regime between Brazil and the EU. He and the ambassadress also talked about ways of facilitating economic cooperation, given that Latvia is becoming a transit and logistics centre in the Baltic states. Bērziņš and Camargo also talked about opportunities for Latvia to open an embassy in Brazil, with the President calling on the ambassadress to encourage the opening of a Brazilian embassy in Rīga. Ambassador Camargo is currently resident in Stockholm. At the conclusion of the meeting, President Bērziņš invited the President of Brazil to visit Latvia. Ričardas Degutis (b. 1966) studied journalism at Vilnius University and is a career diplomat who joined Lithuania‟s Foreign Ministry in 1991. He has worked at Lithuania‟s embassies in Russia and Great Britain. Prior to his appointment to Rīga, he worked as Lithuania‟s consul general in St. Petersburg. From 2005 until 2008, Degutis was Lithuania‟s ambassador to Georgia. Leda Lucia Camargo (b. 1946) is a lawyer who supplemented her education at the University of Paris, the International Academy at the Hague, and Georgetown University in Washington, DC. She has been a career diplomat since 1977 and formerly served as her country‟s ambassador to Mozambique and the Czech Republic. Camargo has also worked at Brazil‟s embassies in the United States, Argentina, and Italy, and at the Brazilian office at the European Union.

Society Latvian Opera Star Marina Rebeka to Debut at New York’s Metropolitan Opera Latvian opera star, soprano Marina Rebeka will make her debut this month at New York‟s Metropolitan Opera as Donna Anna in a new production of Mozart‟s Don Giovanni. Rebeka is scheduled to sing in every Don Giovanni performance this season – October, November, February, and March. Opening night is October 13, but the production can also be enjoyed live in movie theaters worldwide October 29. including Rīga‟s Citadele movie theater The conductor on opening night and on October 29 will be Fabio Luisi, and the title role will be played by Polish baritone Mariusz Kwiecien. Donna Elvira will be sung by Barbara Frittoli; Don 14

Otavio, by Ramón Vargas; and Leporello, by Luca Pisaroni. The new staging is by Michael Grandage. Tickets for the broadcast of Don Giovanni at Citadele on October 29 can be purchased at the box office or at www.forumcinemas.lv.

Latvian Conductor Wins 2011 Baltic Assembly Prize in Arts The jury has voted unanimously that the Baltic Assembly Prize in Arts for 2011 should go to Latvian conductor Andris Nelsons for his outstanding achievements in promoting performing arts and building a positive international image for Latvia, announced the Latvian parliament‟s press service, the Baltic News Service reported. “Nelsons is talented, he has built a successful career as demonstrated by his international achievements and he indeed promotes the Baltic states and Latvia,” Inga Steimane, a Latvian representative on the Baltic Assembly Prize jury, was quoted as saying. According to BNS, the 2011 Baltic Assembly Prize in Literature has been awarded to Lithuanian philosopher Arvydas Juozaitis for his book Rīga – Nobody’s Civilization. Danielus Musinskas, a Lithuanian representative on the jury, was quoted as saying that Lithuania had been trying to win the prize in literature for several years and had finally succeeded. He pointed out that Juozaitis was not a classical writer and his approach was new and surprising. BNS also reported that the 2011 Baltic Assembly Prize in Science has been given to Estonian professor Andres Ilmar Kasekamp for his book History of the Baltic States. This book has high scientific value and also keeps alive the Baltic concept, presenting the three countries not as separate nations but as nations that have a lot in common, Andris Spruds, an Estonian representative on the jury, was quoted as saying. According to BNS, the prizes worth 5,000 euros each will be presented to the winners during the Baltic Assembly annual session to be held in Tallinn on November 24-25. The Baltic Assembly prizes in literature, arts, and science were established in 1994. Founded in November 1991, the Baltic Assembly is a body for cooperation between the parliaments of Latvia, Lithuania, and Estonia.

Six Latvian Poets Present their Works in the UK From October 15-19, Latvian poets Anna Auziņa and Kārlis Vērdiņš, translator Ieva Lešinska, and Latvian Literature Center Director Jānis Oga will present an anthology of Latvian contemporary poetry entitled Six Latvian Poets in three British cities – London, Bangor, and Manchester. October 15 will see poetry readings at Rix Mix Centre, London, featuring poets from Latvia, Macedonia, Russia, and Britain. Following will be poetry presentations at B@r Place, Hebden Bridge, on October 17; Blue Sky Cafe, in Bangor, on October 18; and International Anthony Burgess Foundation Centre, in Manchester, on October 19. Six Latvian Poets is the seventh anthology in the series “Arc‟s New Voices from Europe and Beyond.” The anthology features the work of six of Latvia‟s leading young poets, three men and three women all under the age of forty: Anna Auziņa (b. 1975), Ingmāra Balode (b. 1981), Agnese Krivade (b. 1981), Marts Pujats (b. 1982), Māris Salējs (b. 1971), and Kārlis Vērdiņš (b. 1979). The anthology also features a fascinating introductory essay that traces the history of Latvian poetry from the earliest written word to the present day, by Latvia‟s well-known poet and literary ambassador Juris Kronbergs. This is a bilingual edition, with the Latvian original and the English translation on facing pages. Published in collaboration with Literature Across Frontiers, supported by Arts Council England, Latvian Literature Centre, and State Culture Capital Foundation. Links: www.literature.lv. 15

Articles of Interest Bloomberg: “Zatlers Party Calls for Pause in Latvian Government Negotiations” http://www.businessweek.com/news/2011-10-13/zatlers-party-calls-for-pause-in-latvian- government-negotiations.html. Bloomberg: “Latvia‟s Dombrovskis to Return as Premier After Coalition Accord” http://www.businessweek.com/news/2011-10-11/latvia-s-dombrovskis-to-return-as-premier- after-coalition-accord.html

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

16