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 Lithuania, Discusses Snoras/Krājbanka By Telephone Latvia to Ask Sweden to Help Recover Latvian Savings Bank 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 banks, 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 2 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 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 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