Latvian Political Monitor

To make the procurement system in Latvia more efficient, I will propose that from next year information about completed procurements must be published – this will save quite significant financial resources. https://t.co/s1xRg8vSak

I completely agree. This can be done with an 'iron coalition', as hopefully will be the next one. To create a budget that does not give money to everyone, actually stepping over the natural drive, but focuses only on those who are worst off.

Well, this is the pinnacle of insolence @VKleinbergs … https://t.co/GHlpu9Z8Ig

Mr. Lapiņš, your party NA is a coalition partner of the current government, which has voted on all AB issues and participates in consultations, evaluations, and decision-making. Your questions should be addressed to the previous government and to the entire JV leadership, MPs, finance ministers, and the SM. Currently this government is already dealing with the consequences to save AB, giving the last chance to implement the strategic plan and attract a strategic investor. Watch the video, read the news, and ask your colleagues. Please direct the outrage about AB to Siliņa from JV and Briškens.

Day No. 71 (Friday) in the prime minister’s seat ✈️—airBaltic: the new, expensive short-term private loan Let everyone be clear. The choice is between saving airBaltic or continuing to be a bad owner without money. As prime minister, I do not want the state to continue being a bad owner. We trust the professionals, the management board, the supervisory board and Kozlovskis. The plan was brought to the government, we approved it, anchored it in law, which provides for it. I have been saying for a month that decisions are in the hands of bondholders. In this loan, the state does not invest money in @airBaltic. The loan is private short-term financing (secured bondholders and a private fund without collateral cover) that gives Transport Minister Kozlovskis (JV), airBaltic management and the supervisory board 180 days to finally put the company in order and attract a strategic investor. 💶 The new loan is expensive because it reflects airBaltic’s real financial situation. It is in fact the last chance to save the company. In 2024, during Siliņa's government, airBaltic borrowed 380 million euros in very expensive bonds. Even then, this money was supposed to serve to put the company in order. But over two years the money was burned—costs were not cut, the number of aircraft/routes was not reviewed, and finances and debts were not put in order. The result is logical: the next money is even more expensive because lenders see the company’s current risk. 📌 Note — the new private loan’s interest rate is lower than the 30 million euro state loan supported by Siliņa's government and PRO in APRIL (without a plan, without a rescue strategy). Why lower? Because this government reduces the government’s role. It effectively removes the risk that the state as owner could behave inadequately. Immediately the market is ready to provide funds for restructuring. My position on airBaltic has been clear for a long time: 1️⃣ airBaltic’s future is now largely in the hands of bondholders, not shareholders. 2️⃣ The state as owner and airBaltic management could have put the company in order while it still had money. Weak cooperation between company management and political leadership also led to the fact that the then IPO plan was not realized. 3️⃣ This created a situation where the company has a weak financial position, but the owner—the state—has no free money with which to save the company. 4️⃣ If the state as owner has neither the resources nor sufficient experience and knowledge to pull the company out of a severe financial situation, then the state alone cannot save the company. (ZZS @ViktorsValainis understands very well and knows that Lufthansa refused and does not want to finance AB) 5️⃣ That is why the airBaltic management board and supervisory board, together with Seabury, have developed a plan to stabilize the company’s financial situation with the help of private financial investors—in principle without state money. 6️⃣ For this plan to be implemented, the state must let professionals work and must not create additional obstacles. This is the plan submitted to the government by Transport Minister Kozlovskis, which the government has accepted and for whose implementation the necessary legal framework has also been adopted. 7️⃣ 💼 Financial investors evidently believe that within six months the company’s finances can be put in order sufficiently for airBaltic to continue its development and attract a strategic investor. 8️⃣ Now Transport Minister Kozlovskis and the airBaltic supervisory board, which represents state interests, must do everything possible in these 180 days to attract a strategic investor for whom Riga is important as the main base. 🇱🇻 Latvia needs an investor who sees airBaltic’s long-term development specifically in Latvia, with its main base and jobs. Ideally, it would be a partner alongside whom the Latvian state could also retain or acquire a stake in the company in the future. 9️⃣ This is now the direct responsibility of the Ministry of Transport, Minister Kozlovskis and the airBaltic supervisory board. I will ask for regular reports on the potential investors approached and progress of negotiations. ⚠️ I am not satisfied with the current pace of approaching investors. We must get it together. These 180 days must not be wasted.

It is a myth that the problem can be solved by taxing the rich. It has not brought noticeable results anywhere in the world. But in Latvia, tax progressivity makes no sense at all, because we simply have very few wealthy people. We have also discussed this at work, even the communists admit it. But overall, the tax burden is about 3% (of GDP) lower than the EU average. Which, in my opinion, is okay, because from almost the lowest wealth in the EU, it would be disproportionate to pay the same percentage in taxes as in richer countries. We have greater pressure to pay for basic needs (utilities, food), which is the most painful for people.

I am now fully convinced that everyone only cares about their own little garden, but state finances as a whole - no one. Every day in the Ministry of Finance someone comes and asks for money for themselves. That is actually logical. I have always said that economics begins with the realization that one's own interests come first for anyone. That is how the entire Austrian/Chicago economics school is built. And that is precisely why no state (that I know) is able to balance its budget. I mean democratic states. We have proportional democracy - everyone is proportionally represented somewhere. Impossible mission?

@AtminaLV There is no contradiction there. Spending public money is fundamentally spending. There is no conflict with the idea that borrowed money should not be spent, but invested with a return.

@axe_lv @DiegoMustafa5 Yes, exactly, approximately a third of workers are employed in the public/social sector. Even that many of my detractors don't know. Level sensejs🫠

The value of the state's earlier investments is, in my opinion, zero. Long ago. For years I have analyzed the company in detail and justified it with data from AB's own published reports. For example, that finances run out at the beginning of this year. That's what happened, so the previous government gave 30 million and flew on, that has also been publicly acknowledged. Additionally, at the beginning of the year they published statements that in autumn more would be needed, around 300 million. They would come to the state. They tried, but the government is different, no more handouts. What to do now? The Prime Minister announced that further 'rescue' cannot be only on the state's shoulders. I agree, the aviation business is generally unprofitable, if the state is a participant, then it is basically loss-making (because the state is by definition a bad manager). That was said in this few-month period. No more budget handouts. The task is clear, we will implement it. Now there is a transition period. If private parties give money, then okay, we fly on. They gave, but they could have not given. I think without that the lights would already be out. The state only came to meet by recognizing the remaining investments as worthless. SP Global recognized a de facto default. That was the good will, they practically no longer paid anything. Now what? Now we wait for the test result. After all the worthless political blathering, the moment of truth arrives. Will the bird fly on its own or not. We can only watch and hope.

No. That is not the level of the civil service, by and large it's the coalition, but actually the Saeima. Also, you can't really take money away from any ministry, because funding is allocated according to the budget law. Only small amounts can be redistributed here and there, and even then with the ministry's consent (which is what happens).

Of course, I have always urged to do so. It won't save billions, but tens of millions. Maybe 100, but it must be done anyway. The problem is clearly visible on social media, the voice of the people. Whenever something happens, calls arise to regulate, control, punish. Asked and done. Additional controls and accordingly funding. None of this has come about without a voter mandate.

@Jaunumi_ 6.1 billion. You don't take into account the services provided by municipalities, for example. They are not in the special budget, they come from PIT, mostly go to the social sphere.

@Astridamains Yes, of course. Millions remain in ineffective intermediate layers. But billions are distributed among hundreds of thousands of recipients.

@andrislov We will first slash everything first. That's how politics, democracy works. And it doesn't matter, in the whole EU or USA. Opposing ideas have no voter. People like me are not elected at all or in no way a majority. Politicians like Milei are elected when it's the absolute end and only then.

Mostly some pay taxes, others receive. It's not just here. I've been paying taxes in the private sector for 39+ years. Now I've only been working in the public sector for a few months as an exception. But I've been paying for health services all these years; my money goes to pensioner quotas. It's ok.

Coffee cup mathematics. Let's take, for example, a caffe latte for 5 euros. If every person in Latvia received on average a state-paid service less than one lat per month, how much would be saved? 100 million per year. Not everyone drinks such an expensive latte, not everyone needs to have it taken away, I'm not suggesting that, the number is average, for illustration. But 20 unsponsored latte cups per month (one every working day) solves the budget deficit to zero. Remember Argentina's Milei? Chainsaw? He achieved budget balance by reducing public spending by 800 dollars per inhabitant per year. That's 14 caffe lattes per month. He cut ministries in posters, but saved billions in public sector spending. When we have squandered everything, we will do the same, and those undrunk lattes will not cause anything tragic. 20 cups per month.

Regarding budget problems, there are two entrenched myths. First, that budget expenditures can be cut linearly. That is a popular slogan. The second myth is that the problem can be solved by cutting only 'the bad ones', others. Almost always officials are invoked. Both myths are financial illiteracy. The state apparatus can always be made more efficient, anywhere and anytime. 10% or more? Public administration is nowhere, in no country, as efficient as a private company, where profit motive or survival is a natural regulator. In public administration, by definition, such a regulator does not exist, so efficiency gains can only happen through coercion, through reform and dictate. With force, coercion. But that cannot solve the budget deficit. That way you can save some tens of millions, leaving 2000 million of deficit. Large sums go to the public sector (300+ thousand employees - police, doctors, teachers, soldiers). And together they are billions. Then the social sphere is funded with 6 billion, the majority of society. Those sums are not large individually, but there are many recipients - that's where the billions come from. If we really want to solve the problem at its root, we need to improve efficiency across all spheres as a whole, look at where it is truly needed, where there are inefficiencies. But that is guaranteed to affect some of us personally, even by a few euros. And that will never be popular, that is the most essential problem, the root of the political problem. Almost no country in the world can solve this.