EU country briefing: Latvia

The following article is a part of a series of brief country profiles for the EU-28 ahead of the European elections in May.

Like for its fellow Baltic states Estonia and Lithuania, Latvia’s EU accession was a milestone for a country that used to be part of the Soviet Union until 1991.

In 2003, roughly two-thirds of Latvians (67.5%) voted in favour of joining the European Union. A year later, it became a member, along with nine other Eastern and Central European countries.

By 2007, Latvia also joined the Schengen area. It was the second Baltic country adopting the euro currency in 2014, after its northern neighbour Estonia did it 2011.

Latvia is one of the smaller EU states in population, with fewer than two million citizens in 2017, down from 2.7 million in 1991. The country will elect 8 Members of European Parliament (MEPs) in this year’s European Parliament (EP) elections.

The country has a diverse ethnic make-up: 62.2% of citizens are Latvian and over a quarter Russian (25.2%). Smaller minorities – Belorussian (3.2%), Ukrainian (2.2%) and Polish (2.1%) – frequently use Russian as their first language and are referred to as “Russian speakers”. In certain urban areas, such as the city of Daugavpils, Russian speakers form the majority.

54% of the Latvians consider EU membership a positive thing while 5% don’t, compared with the EU average of 61% and 11%, respectively. A considerably large part of the population (39%) is indifferent.

Some 75% consider themselves to be EU citizens, and the euro enjoys even stronger support (81%).

However, in the 2014 EP elections, only 30% turned out, well below the EU average of 42.6%.

Economy

Latvia’s economy grew rapidly at a rate of 4.8% and 4.6% (real GDP) in 2018 and 2017. The average annual growth from 2014 was 3.3% – above the EU average (2.1%).

However, the country fell on hard times following the financial crisis in 2008-10 (some experts suggest even more than Greece), as the GDP dropped by almost a quarter, prompting the government to seek a financial bailout by the International Monetary Fund (IMF) and pursue one of the most rigid European austerity programmes.

In 2010, the crisis left one out of five people and one out of three young people jobless. However, Latvia rebounded quickly, and as of 2018, unemployment stood at 7% and youth unemployment at 12.2% (compared to the EU28 averages of respectively 6.8% and 15.2%).

A recent European Commission forecast indicates the economy is slowly running out of steam, with expected growth rates of 3.1% and 2.6% in 2019 and 2020. Moreover, the IMF noted in 2018 that “labor market constraints and demographic headwinds pose significant challenges to the medium and long-term outlook’’, illustrating the problem of emigration, as the population is expected to decline to 1.6 million by 2050.

In recent years, Latvia’s banking sector has been rocked by several money laundering scandals (like in some other EU states) featuring schemes from which Russian tycoons have long profited.

The country’s total GDP was €27 billion in 2017 – a mere 0.2% of total EU GDP (minus the UK). Per citizen, the real GDP was €11,600 in 2017, less than a half of the EU28 average €27,700. This represents to 67% of the EU average in purchasing power standards (PPS).

Almost a quarter of people in Latvia are at risk of poverty, an increasing rate despite recent economic progress, with significant regional differences between for instance the poorer Latgale region (39.2%) in the east and the capital Riga (13.5%).

Political context and direction

Like its Baltic neighbours, Latvia regained independence following a series of struggles, the one with the most impact being the Baltic Way in 1989, in which two million people in Estonia, Latvia and Lithuania formed a human chain across the three countries. It was followed by the first free elections in 1990.

When Soviet forces attempted to reclaim the country, hundreds of thousands of Latvians resisted without violence by setting up barricades to protect the Parliament, TV and radio stations, and other strategic objects for two weeks in January 1991. Six people were killed by the Soviet Special Forces and many injured.

De facto independence was regained only in August 1991, after a failed coup in Moscow. Following the parliamentary elections in 1993, Latvia’s 1922 democratic constitution was restored.

The president is the head of state (Raimonds Vējonis since 2015), elected by the Parliament. The role is mainly ceremonial, though the president is the country’s commander-in-chief and shares some power with the government and prime minister. The prime minister (Krišjānis Kariņš since 2019) wields most executive power.

Latvian politics is unpredictable, with a high turnover of parties. Individual politicians often change their political allegiances so that personalities rather than political parties tend to matter most.

Moreover, coalitions are always composed of more than two parties, which encourages a centrist compromise but also creates more scope for shifting alliances.

Dominant parties have been primarily liberal-conservative, the first main one being Latvian Way (LC), from 1993 to 2002. LC rebounded in 2006 as part of a conservative alliance with Latvia’s First Party (LPP) led by Ainārs Šlesers. LPP entered the Parliament in 2002.

The conservative People’s Party, led by business oligarch and two-time Prime Minister Andris Šķēle, was also an important political force (1998-2010), before ending fifth in 2010 as part of a short-lived conservative alliance with LPP/LC – For a Good Latvia (PLL).

Another party with staying power was the liberal-conservative New Era (JL), which governed through 2002-2006 and 2009-2010. JL formed the “Unity” alliance (also liberal-conservative), which won the 2010 parliamentary elections, and has been part of all governments since.

Valdis Dombrovskis, part of JL and later “Unity”, was the country’s longest serving prime minister (2009-2014), before he resigned over a supermarket’s collapse which saw 54 people killed. He ran for the European Parliament and became European Commission vice-president for the euro and social dialogue in 2014.

“Unity” ended third in 2011 snap parliament elections, behind the liberal-conservative Reform Party (ZRP); and second in 2014 elections, after making an electoral pact with ZRP, which it later absorbed.

The centrist agrarian alliance Union of Greens and Farmers (ZZS), a merger of the Latvian Green Party (LZP) and Latvian Farmers Union (LZS), governed through 1993-1998. Since 2002, ZZS was part of most governments. In 2006, it incorporated the regional party For Latvia and Ventspils, led by Aivars Lembergs, an oligarch who became ZZS’s main financial supporter.

The 2011 snap elections, triggered by a referendum called by the then-President Valdis Zatlers, shifted Latvia’s political landscape. The official motivation was the fight against oligarchs – Andris Šķēle, Ainārs Šlesers and Aivars Lembergs – following allegations of corruption and embezzlement.

Only Aivars Lembergs continues to wield political influence as the mayor of Ventspils and through ZZS, despite ongoing criminal proceedings.

The party enjoying the most support over the past three elections (2011; 2014; 2018) is the Russian minority (centre-left) party, “Harmony” (formerly “Harmony Centre”). After breaking through in 2006, it became a major political force.

However, “Harmony” never managed to govern at the national level, as it is seen as political suicide for any other party to side with it because of its image of a Kremlin pawn. It only broke its official ties with Vladimir Putin’s United Russia party last year.

“Harmony” has governed in the capital Riga since 2009. However, a recent large-scale embezzlement scandal concerning the city’s transport company has led to the dismissal of the Mayor, Nils Ušakovs. His deputy Andris Ameriks had resigned earlier. They subsequently announced their intention to run for the European Parliament.

The country’s most influential nationalist party is the National Alliance (NA), formed in 2010 as an alliance between the far-right All for Latvia! (VL) and a union of two early national independence parties “For Fatherland and Freedom”/Latvian National Independence Movement (TB/LNNK). TB/LNNK (1993-2004; 2006-2010) and NA (since 2011), have been part of most Latvian governments.

The parliamentary elections in 2018 prompted another political change, with most parties suffering losses (except “Harmony”, which won the election despite losing support). NA ended fifth with 11%, worst result since 2010; and ZZS sixth with 10%, the worst result since its foundation.

“Unity” suffered the most due to internal infighting leading to a split before the elections, with former members creating/joining two new liberal parties: “New Unity” and “For Development/For!” (AP). “New Unity” ended seventh with just 7% support.

Three new parties entered the Parliament: the right-wing populist “Who owns the state?” (KPV LV), the conservative New Conservative Party (JKP) and the aforementioned AP. They received support of 12-14% each, leading to a heavily fragmented Parliament.

This prompted the country’s longest government formation since 1991. The humiliated “New Unity” miraculously managed to deliver the prime minister, Krišjānis Kariņš (a former MEP and a compromise candidate), who now rules a coalition of five political parties. He was the third nominee after KPV LV and JKP failed to form a sustainable coalition.

Several issues have dominated public discourse. The European migrant crisis in 2015 prompted hostility owing to Latvia’s own emigration and security concerns. Thus Latvia opposed the compulsory redistribution of refugees and rejected the UN Migration Pact in 2018.

There is also the problem of the non-citizen status, which grants economic and most political rights but not voting rights. The share of non-citizens has decreased over time, however, circa 11% of people (mostly Russian speaking) still have non-citizenship status, which has been at times, heavily politicised.

Moreover, the issue is often (mis)used by Kremlin to discredit Latvia internationally.

There have been several corruption scandals, especially in the financial sector. The Council of Europe criticised Latvia for failing to tackle money laundering and terrorist financing in 2018.

Moreover, in 2018, the central bank governor, Ilmārs Rimšēvičs, was embroiled in accusations of bribery (accusations were later refuted). These issues had a serious impact on the 2018 elections, with many new political parties launching on anti-corruption platforms, including the JKP.

Predictions

In the last election, the low turnout benefited “Unity”, which managed to snatch half of the available MEP positions. It is difficult to predict MEP seats, due to poll volatility and the de facto electoral threshold caused by the limited EP seats.

The personalities put forward by parties matter, and in Latvia there are many heavyweights taking part, including popular academics Ivars Ījabs (AP) and Andis Kudors (JKL), former Finance Minister Dana Reizniece-Ozola (ZZS), veteran MEP and ECR Vice-President Roberts Zīle (NA), the European Commissioner Valdis Dombrovskis (“New Unity”), but also the “Harmony” leader and dismissed Riga mayor Nils Ušakovs.

Based on a combination of polls, it is expected that “Harmony” will win two MEP seats with 21% support for the Progressive Alliance of Socialists and Democrats (S&D). “New Unity” is set to improve its result compared to last national elections and end second with 14% of the vote, securing two MEP seats, for the European People’s Party (EPP).

Other parties expected to win a single MEP are AP, ZZS and JKP. It is unclear yet which European group they will join in the EP.

KPV LV is not expected to win an MEP seat because of recent party infighting. The remaining parties that could gain a seat include the pro-Russian The Latvian Russian Union (LKS), the centrist Latvian Association of Regions (LRA) and the social-democrat The Progressives.

Ilvija Bruge is a researcher at the Latvian Institute of International Affairs. She holds Master degrees in International Relations (Riga Stradins University) and Social Anthropology (The University of Edinburgh), as well as is a PhD researcher in Political Science.

Robert Steenland works as an evaluation and research consultant in EU policies, as well as an analyst in EU politics.  He holds a double degree master in European Governance.

Daniel Matthews-Ferrero is a Marie Curie PhD researcher in the POLITICO programme at the University of Aberdeen, focusing on contemporary Western European populism. He holds a Master’s degree in European Interdisciplinary Studies from the College of Europe.

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