Latvia has been plagued by both deep recession and fractious relations with its large Russian-speaking minority. But with the economy now recovering fast, Andrew Wilson believes the country is creeping under the radar and off the well-worn postcommunist map.
Mention Latvia abroad and one of several stereotypes will likely emerge. Most probably the fact that Latvia had the worst recession in Europe after 2008, with GDP falling an estimated 25% from peak to trough. Or the opposite story of the economy’s heroic re-emergence since then, after facing down calls for currency devaluation and opting for an “internal devaluation” instead, meaning a savage “fiscal adjustment” (mainly government spending cuts) of 13-15% of GDP – and yet more tens of thousands of Latvians being forced to seek work abroad. Other easy headlines are that a Russian fifth column is about to take power in a state that has been a member of both NATO and the EU since 2004, or that the veterans of the Latvian SS [who fought on the German side against the Soviets in WWII] are on the march again (as they do every 16 March).
In fact, after new elections on 17 September, Latvia may be on the brink of a mini-revolution, or at least a way out of the dilemmas that have constricted its politics for too many of the last twenty years. Another stereotype that is closer to the truth is that Latvian politics is divided between “the good guys, the bad guys and the Russians”. The good guys are the normal Latvian parties, almost all on the centre-right. The “bad guys” are the local “oligarchs”, who set up their own parties and made Latvian politics seem more like turbulent Russia or Ukraine than its quietly Protestant Estonian neighbour. Their power came from an opaque privatisation process in the 1990s and Latvia’s ambition to become a “Switzerland of the north”, which led to an under-regulated banking boom in the 2000s and to Riga becoming an easy home for Russian “offshore” capital.
But the oligarchs over-reached themselves after their front parties won the 2006 elections. Their attempts to take control over the security services and procuracy led to the then President Vaira Vike-Freiberga calling a referendum on the new security laws in July 2007 and to popular protests dubbed the “umbrella revolution” in rainy Riga that November, which brought down the government of Aigars Kalvitis, from the oligarchic “People’s Party”. One ironic benefit of the recession thereafter has been the oligarchs’ gradual retreat from centre-stage. Valdis Dombrovskis has been prime minister since spring 2009, spearheading the centre-right’s fiscal retrenchment out of the crisis.
Two out of three oligarchic parties dropped out of parliament at the next elections in October 2010: the People’s Party disbanded itself to avoid a fine for abusing campaign finance law, but Ainars Slesers, the former Minister of Transport nicknamed the “human bulldozer”, then merged two of the other losers to try again with his own “Reform Party”. And one oligarch party remained at the heart of government, the Union of Greens and Farmers (ZSS) – a rural and regional network of local power-brokers headed by Aivars Lembergs, long-time major of the western port of Ventspils.
"If the three-part stereotype can truly be dropped, there is huge work to be done by all parties in rebuilding the public sector, health and education in particular."
The other side of the equation was provided by the Latvian “Russians”, in reality a broad set of Russian-speaking communities including Belarusians and others, and some ethnic Latvians. They have been excluded from power to date because their leaders will not use the ‘o’ word, refusing to accept that Soviet rule meant occupation rather than liberation. After rows over citizenship in the 1990s, Russian-speakers have gradually become better organised, with Russia itself paying more attention to helping mobilise “its” people abroad after the Orange Revolution in Ukraine in 2004. In the 2006 Latvian elections they tried two columns, with the radical Russian nationalists in “For Human Rights in a United Latvia” supposed to emphasise the virtues of the more moderate “Harmony Centre” alliance. This didn’t work. So at the last two elections in 2010 and 2011 Harmony Centre has led a broad front with the youthful and urbane Nils Usakovs, mayor of Riga since 2009, at the head.
On the eve of reasserting its independence in 1991, Latvia’s ethnic breakdown was 52% Latvian and 34% Russian; it’s now 60% to 27%, though with 300,000 Russian-speakers still non-citizens. Until recently therefore, the “Latvian parties”, not wanting to deal with the “Russians”, had to deal with the oligarchs instead. But the oligarchs are in decline and Harmony Centre may already have maximised its vote. A new Latvian party, “Unity”, was set up in March 2010 as a counterweight to the increasingly united Russian voting block and came first in the October 2010 elections, but still had to set up a coalition government with ZSS. Prime Minister Dombrovskis was reappointed, after his tough but effective handling of the financial crisis.
But in May 2011 parliament refused to sanction a search of Slesers’ home, with the ZSS voting with Harmony Centre against. President Vladis Zatlers then narrowly lost a vote in parliament for a second term to Andris Berzins, a relatively independent figure from the ZSS.
So Zatlers gambled. He called a referendum in July 2011, with 94.3% of voters supporting the dissolution of parliament – the first in modern Latvian history. On the same day Zatlers set up a new “Reform Party” named after himself. His aim to change the rules of the game by expanding the ranks of the centre-right, although his opponents argued he was risking the country’s whole post-recession “brand” of stability and recovery, and should simply have joined Unity instead.
The extraordinary election last week left Zatlers only partially vindicated. His Reform Party did indeed take votes off Unity, but also from the oligarchs. Turnout was down, which was a big disappointment. A frustrated Harmony Centre came first with about 29% (up 2.3%), but had not “won” the election as its prospects for coalition partners remained uncertain. But for the first time in years the centre-right had the option of governing alone – if they could get along. Zatlers’ Reform Party won 21%, Unity 19% (-12.4%), and the Latvian nationalists 14% (+6.2%), which would easily make more than half of the seats together. ZSS was sharply down on 12% (-7.4%) and Slesers’ Reform Party won only 2.4% and no seats. Final results will take two weeks, particularly because of the delightful Latvian quirk that individual politicians are rated by voters on a plus or minus basis, and the net vote can see prominent leaders disappear from sight or neophytes summersault into their place.
Latvia has had seven quarters of growth since its mega-recession, but isn’t out of the woods yet. But the fact that Latvia has grounds for a more optimistic politics after such economic turmoil is remarkable enough. If the three-part stereotype can truly be dropped, there is huge work to be done by all parties in rebuilding the public sector, health and education in particular. Ironically or not, Latvia still hopes to join the euro in 2014. There is also the dilemma of when to make a historic compromise with Harmony Centre. As its support has grown in recent elections, its exclusion from office has grown more stark. A way needs to be found to marginalise radical voices like Socialist Party leader Alfreds Rubiks, the last pro-Soviet leader of the Communist Party in Latvia, who was actually imprisoned in the early 1990s. This could “normalise” the moderate Russophones in government and help share the pain of further reform.
Andrew Wilson's latest book, Belarus – The Last European Dictatorship will be published by Yale in October.