Central Europe Review - EC Progress Reports 2000: Latvia

The keyword for Latvia in its relations with the EU has been "catching-up"—a principle that should allow candidates who started the accession negotiations later to catch-up or surpass the leading candidates in the race for early membership.

Although the "2000 Regular Report from the Commission on Latvia's Progress towards Accession" shows that Latvia is decreasing the distance between itself and the leading five CEE countries, Latvian officials are privately expressing disappointment that the Report puts their country in the same "category" as Slovakia and Lithuania, rather than upgrading it to the level of the Czech Republic and Slovenia, not to speak about the leading troika of Estonia, Hungary and Poland. The leading five should meet the EU's economic entry criteria "in the near term" rather than "in the medium term" as the Commission forecast last year, an evaluation it has maintained for Latvia.

Therefore, the realization that it is Lithuania and Slovakia that have "caught up" with Latvia, and not Latvia closing the gap with Estonia, has somewhat disappointed Rīga.

Market success

Apart from the sensitivities of "inter-Baltic" perceptions, the new Report has been quite well received in Latvia. It commends Latvia's progress in all the important issues mentioned in the previous reports.

The Report reaffirms that Latvia "can be regarded as a functioning market economy" that should be able to cope with the EU's competitive pressure and market forces in the medium term, providing it stays on its reform path.

Economically, the main tasks for Latvians in the months to come will be fiscal discipline and the completion of privatization, says the European Commission. This corresponds to the recent assessments and recommendations of the IMF and World Bank. "The authorities must continue a policy of fiscal discipline while fiscal consolidation should be pursued. Completion of enterprise privatization for the remaining large companies should be carried out without any further delays," the Report says.

Although Latvia has preserved its macroeconomic stability over the past year and made progress on structural reform, the current account deficit must be kept under control.

Latvia's small financial sector is regarded as well-functioning but the Report points to the need to encourage private and public investment and to enhance the market-oriented skills of the workforce.

Enforcement of intellectual property rights is an issue of major concern,

and the Commission sees little progress in this area. Again, this assessment corresponds to a certain extent with concerns of other Western countries—US trade officials earlier this year put Latvia on the watch list of countries whose intellectual property rights record are to be carefully monitored.

While the steady progress on adopting the acquis communautaire—the EU's body of laws and standards—is mentioned by the European Commission as another positive development for Latvia, "only limited progress" is noted in agriculture.

In general, though, the European Commission regards Latvia as likely to be ready for competition in the EU market in the medium term.

Daria Kulagina, 13 November 2000

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