Central Europe Review - Latvian News Review

Managing the Council

Last week marked the beginning of Latvia's six-month tenure as President of the Council of Europe (CE). This is the first time in Latvia's history that it has had to manage the affairs of a pan-European organization.

Foreign Minister Indulis Bērziņš promised that the focus of the Latvian presidency would not be exclusively political, and vowed to pay special attention to cultural issues in smaller European states. Latvia also announced its priorities for its term as president of the Council. They include the situation in the Balkans and the Caucasus and improving the efficiency of the Council's institutions, particularly the European Court of Human Rights.

"A chance to overtake"

The European Commission's annual Progress Report on Latvia was the third consecutive positive assessment of Latvia and "offers a chance to overtake" the first group of candidate states for European Union membership, said Andris Ķesteris, Latvia's chief EU negotiator.

A champion in Sweden

Visiting Swedish Foreign Minister Anna Lindh said she thought some candidate countries could join the European Union even a few months earlier than the end of 2002, which is the date predicted by the European Commission's report this week.

Pushing ahead with expansion will be a top priority for Sweden during its presidency of the EU in the first half of 2001, she said. Sweden hopes to see all negotiating chapters open with Latvia during the presidency and "substantial progress" made toward closing them during that time.

Abstaining on Cuba

Latvia abstained at a UN vote to lift US sanctions against Cuba. The UN General Assembly, for the ninth year, voted overwhelmingly for an end to the 38-year-old American trade embargo against Cuba.

The vote was a record 167 in favor, to three against—the United States, Israel and the Marshall Islands—with four abstentions: El Salvador, Latvia, Morocco and Nicaragua.

The 15 members of the European Union, along with such allies as Japan, Canada, Australia and New Zealand, all voted in favor of the non-binding resolution on US laws which affect some foreign firms that have commercial dealings with Cuba.

Vīķe-Freiberga plays hardball

In an interview on the BBC's "Hardball" program, President Vaira Vīķe-Freiberga said that Russian nostalgia for the Soviet empire was still troubling and that she would expect help from NATO if Russia threatened Latvia, even though it is not a member.

"Kosovo is not a member of the NATO alliance, yet the alliance was able to take action when it felt that, according to the principles on which it is founded, action and intervention was necessary," she said.

"I would expect it to do no less anywhere else in Europe." The interview, conducted by the well-known Tim Sebastian, was widely publicized in Latvia and caused an exchange of angry statements between the Russian and Latvian foreign ministries.

IMF warning

An International Monetary Fund (IMF) mission to Latvia urged the government to make good on its promise to narrow the 2001 budget deficit, after the government broke its pledge over this year's fiscal shortfall. The mission to Latvia also said it expected the GDP this year to rise five percent, but warned that the economy could face problems without a prudent fiscal policy.

Members of the IMF mission also said they expected this year's inflation to be three percent, or less, and the current account deficit to be eight percent of GDP. The 2000 budget, amended earlier this month, revised the planned fiscal gap to 3.18 percent of GDP (according to IMF calculations, the figure is 3.6 percent, due to differing views on the use of privatization proceeds).

Latvia has a precautionary agreement with the IMF that paved the way for a three-year, USD 120 million program of structural adjustment loans. The agreement ends in February 2001.

Forecasting the economy

Latvia's central bank upgraded its forecast for economic growth this year to 5.5 percent, but it also warned the government that its broken promises on cutting the budget deficit could hurt the country's bid to join the European Union.

Central bank head Einars Repše said that the government's broken promise to limit the fiscal deficit to two percent of GDP this year and one percent next year could hurt its credibility in the long-term. The central bank also said that, despite complaints of exporters suffering losses due to the euro's lows, it remained resolute not to change the lats' peg from the Special Drawing Right (SDR) currency basket and saw a euro peg no earlier than in 2003, sticking to its previous policy statements.

And in other news...

Ventspils Free Port (VFP) is expected to receive a state guarantee in November for a EUR (euro) eight million (USD 6.9 million) European Investment Bank loan. The loan has been denied for about the past year. VFP has already taken state guaranteed loans of LVL (Latvian lats) 23.4 million (USD 37.4 million). State loan guarantees to ports total LVL 38.3 million (USD 61.2 million).
The possibility of the three Baltic states—Estonia, Latvia and Lithuania—joining the Nordic Council could be discussed at the next joint meeting of Baltic and Nordic Councils in May 2001.
Ventspils Nafta (Ventspils Oil) President Igors Skoks stressed a need to diversify more rapidly into sectors other than its core oil transit business to offset dependency on Russian policy decisions.
The agriculture ministry has started a review of the Baltic free trade agreement for agricultural goods—which has been in place since 1997—with the goal of equalizing conditions, which it says do not favor local producers.
Latvian IT companies are reluctant to provide funds to finance an attempt to increase the number of IT sector students in state universities and have suggested a long-term loan program as an alternative.

Exchange Rates As of 10 November 2000
Currency	Latvian lats (LVL)
1 US dollar	0.63
1 British pound	0.89
1 German mark	0.28
1 euro	0.54

Daria Kulagina, 10 November 2000

Moving on:

Sources:

Diena
Reuters
Neatkarīgā Rīta Avīze
LETA
BNS
Dienas Bizness
Bizness Baltija