Latvian Political Monitor

Day No. 79 (FRIDAY 18 Sept) — The new European MFF budget in the Saeima, meeting with security services 🎾 I opened the best padel sports centre in Latvia and all Europe – “LNK Industries” have invested more than €10 million of private money to host a world-class championship in Latvia, attracting the 300 best top-level athletes from around the world. I will always support our own entrepreneurs. This will certainly give a big push to the development of padel sport in Latvia. 🏛️ In the Saeima I went to the European Affairs Committee I explained to the parliament deputies the government's position in the negotiations in the European Council with leaders and the Commission on the new EU 7-year budget: ➖ This budget will be more challenging than any previous one, because negotiations take place when the EU economy is stagnating, there is the impact of the war caused by Russia, support for Ukraine, the eve of major political changes, as well as the impact of the Hormuz conflict on inflation and energy ➖ The paying countries, especially Germany, see no possibility to pay what is asked, while the receiving ones this time absolutely do not back down from their needs – the EU Commission and António Costa will have a very difficult time reaching an agreement by the end of the year ➖ I pointed out that Latvia suffers at least €1 billion per year, or due to the threat from the eastern neighbour, GDP is 1.9 percentage points weaker than the EU average, while inflation is 3.7 percentage points higher than the EU average. That will be €7 billion in 7 years, and in parallel Latvia spends the most on direct defence, borrowing “SAFE” money, which creates an even greater debt burden, while our direct military purchases warm the economies of Spain, Germany, Sweden and Finland ➖ Latvia historically receives smaller direct payments for farmers in Europe – this unfairly arose many years ago due to incorrectly made calculations. I remind about this every time I meet ➖ The new EU budget envelope is completely different than before, because the EU very cunningly packs together cohesion and agricultural funding, leaving its redistribution to each member state. The problem-solving is shifted to the national levels of 27 countries, not a centralized agreement as before. That means we in Latvia will have to agree very seriously and responsibly on the correct allocation of these funds ➖ Latvia currently unofficially has a calculated larger EU funds budget than the previous envelope, but when recalculated in nominal prices, it turns out that the new one is smaller! A serious fight lies ahead to win a fair result for Latvia, especially considering how much we invest in strengthening the EU's external border and security 🕵️‍♂️ I met with MIDD, SAB and VDD about the security situation in the country ➖ The main conclusion – especially German, but also Polish, French and other countries' societies are little informed about Russian threats and hybrid attacks, thus not paying enough attention to national investments in defence and support for Ukraine ➖ The loud rhetoric is mainly intended for internal, not international, communication. In Latvia, on the other hand, there is an overly informed and sensitive society that perceives this common background with a certain level of anxiety ➖ This is also where this imbalance arises between European leaders' desire to mobilise their societies, which indirectly affects Latvian people, increasing concerns ➖ The Russians are certainly ready to carry out various provocations, and the services do not rule out such a possibility – at present the services have no more specifics, and the threat level remains as before Our greatest attention is focused on security measures during the elections, so we have asked, and the Germans have agreed to send us fighter jets to additionally watch over our airspace 💪🇱🇻

@EdgarsPutra If Valainis in Riga on posters promises food without VAT, then with such trivialities he certainly won't bother…

@evita_purina @jemberga There is already an average pension of 1000 and an average salary of 2500.

@Rudmatis Yes, the IMF believes in nothing other than raising taxes. And why should it believe? That many parties on credit. Can we change?

Day No. 78 (THURSDAY 17 Sept) — Meeting with US envoy John Coale and the Swedish ARCHER howitzer story; LIZDA 🤝 Meeting at the Cabinet of Ministers with the US D. Trump (@realDonaldTrump) envoy on Belarusian affairs, John Coale (@johnpcoale). So active, sharp-minded and with a good sense of humour – I was surprised to learn that he is already 80 years old. ➖ He had just returned from a meeting with Lukashenko, where, thanks to his efforts, a large number of political prisoners were released ➖ It was a very substantive conversation in which we discussed the situation in Belarus, the US role, the war in Ukraine and the issue of Russia and Ukraine's grain blockade ➖ I particularly highlighted Russia's organised hybrid attack with the flow of illegal migrants to the LV border through Belarus, in which special services participate and which they organise – I presented the latest figures and measures ➖ I stressed that US–Latvian economic relations cooperation must be changed and raised to a new level from 15th place into the TOP 5️⃣ – I mentioned the military industry, the energy sector and US cargo flows from Central Asia ➖ He promised to discuss the Latvian question with D. Trump 🛡️ The defence deal question on the ARCHER system from Sweden 🤷‍♂️ It is incomprehensible what motives drove the previous defence minister not to make a decision for 2 years on the purchase of the defence system and howitzers. To me it is a mystery, because if the decision had been made, we would already have had systems delivered that would fill a significant pillar of Latvia's critical defence plan. ➖ Because of the delayed and unadopted procurement decision, it is now necessary to assess which supplier is more suitable so that we can fill this position as quickly as possible. With the Czech 'Morana' system, this can be done at least 1.5 years faster ➖ Capabilities and total costs are also not unimportant. The Czech system works with all NATO and Latvia-held 155 mm ammunition, and there is a very large financial difference – we simply do not have the resources in the Ministry of Defence budget to buy the expensive Swedish systems. Moreover, the Czech manufacturer will localise 20% of production in Latvia – that means jobs, taxes and production capacity! ➖ The NBS already a year ago and again now confirmed point by point that it is not changing its assessment – for Latvia's needs the Czech system is more suitable because it covers the needs fastest 👥 Meeting with LIZDA (@lizda_lv) ➖ We talked about education reform and the fact that changes need to be less frequent and smaller. Schools and teachers are very tired of constant changes ➖ We discussed budget issues – I listened to LIZDA's and teachers' demands, while LIZDA's head Inga Vanaga also listened to my and the Cabinet's questions about state finances and the budget 📡 Meeting with OTAN ➖ OTAN military communication system that can combine all communication networks into one – a solution for civil protection services and municipalities to be in a single communication system. It is a very worth-considering option to deploy it across all Latvia, not only for military needs in the border area. I will speak with Raivis Melnis about funding 💪🇱🇻 📰 I gave interviews to Bloomberg magazine and , LIZDA

Any restriction of expenditure will, of course, affect current GDP. GDP already reflects current spending. Example from the Kalvītis floor-it period. Money flowed in streams, on credit. It was a good party. GDP grew at great cost. Nice? And then a severe hangover. I doubt that this scenario needs to be repeated. In my opinion. Of course, if borrowed money is not pumped into consumption, it will have a negative impact on today's spending (GDP). How much? Economists are trying to forecast it. But it will not be 1:1, because our spending also includes many imported goods. Purchasing imported goods has virtually no effect on GDP. Well, then you can look at scenarios. Whatever they may be. And then estimate the negative impact on GDP.

@Rodzha Yes. All of that has been built up over many years. The next multi-year budget... I don't even know how we'll manage to make ends meet now. No, well. The worst was 2009 when pensions were cut. That's not threatened here, but in all other respects the situation is very complicated.

There is a lot. And no, the presentation contains what has never been shown to the public before. The three scenarios have not been shown. Plus with the latest updated data, which is also fresh. And additionally, we have done a lot. These are just summary numbers, we have a very extensive material underneath. Every corner has been searched. Options where we could save something, consolidate (duplication of functions) and the like. A menu for the next coalition. Various choices. Just don't take me for a fool either. In the pre-election fuss, such things won't come out of the Finance Ministry. It has happened before with the previous minister. You give the menu, but the political manipulation specialists present it as 'The Ministry of Finance is preparing ... either to raise taxes or to take bread from German children'. From Shurik's creativity. We are not preparing anything and there is no such function. When the new coalition sits down at the table and understands what it wants to do, which scenario to choose, then I can give the menu. Chicken, meatball or kebab. Choose! 🙂

An important question for residents and investors is what will happen to tax rates. Taxes should not be raised! But at the same time, we must abandon the once-prevalent view that there is as much money as ever, and continue to assess whether all planned expenditures are reasonable. I addressed this to @FICILatvia https://t.co/scj2wu8aeU

Well, it's been happening for a long time, all the time. A schedule was approved in the spring, and a lot has already been done. The presentation only presented aggregate numbers. Underneath them, detailed calculations have already been prepared, with choices outlined that politicians will have to review and decide one way or another. We need to listen less to the muttering on social media. It's all fake that 'nothing is there'.

The Finance Minister announced his choice this morning on the Morning News. The medium scenario. Why? Well, because right now it's not realistic to fill the hole that has arisen by adding an additional 3% of GDP for defense. And no country can do that. Absolutely none. So what then? Well, one option would be at least not to use the allowed increase in borrowing for defense plus 1.5% of GDP, but to try to keep the deficit at the old 3%. Which is also very difficult to do. In a normalized (not war preparation) budget, that would be a balanced budget. We don't have a normal situation. Defense has to be financed at all costs, and then some deficit inevitably arises. But that has to be accepted. But what the new coalition or even any specific party will decide - we'll see, there are still many faints and debates ahead.

What are you going to purge? Well, then say it! Lay off the army, police, doctors, or teachers? They are all in the public sector. At all levels, you can barely scrape together 100 million from civil servants. Not billions by any means. Then, whether you like it or not, you will have to answer to those who will be elected. If you are so eager for power, realize that it will be you who will have to do something like that, and then your own brothers and sisters will cut off your head. That is exactly what happened to the French with that revolution. After all, you too are revolutionaries?

Today there was hysteria in the Saeima Budget Committee. We showed the true state of the budget. This follows the Kübler-Ross model (described in the book 'On Death and Dying'). The first stage is denial. They denied the data, refused to believe it, and started shouting. What is it about? You see, the projected budget for the coming years has been deep in the red for a long time. This is publicly known. More than a billion needs to be cut, but mainly by 2030. That is far away. But that is only half the trouble. There are also additional decisions adopted for over 2 billion that need to be cut on top of that. And they have been promised, but money in the budget will be sought only after the elections (because it is a political choice and not for this Saeima). There you have it — so what will we take away? Only the new Saeima may decide that. Logically. And together it is apocalyptic — billions are not millions and not even hundreds. It means limiting public expenditure. Which ones? Well, that will be the choice of the next coalition/Saeima. We showed the apocalyptic hole in the wallet that has been built up over many years. And that is not all. These deficits are if we continue borrowing as before. Up to the brim. To achieve a deficit-free budget, 9 billion need to be cut. You could even dismiss all ministries and shut the state down, and it still would not be enough. So there you have it. Ten years of blatherers in power. What did you expect?

For the Prime Minister, every day is like Monday 🎙️ A year after our first conversation, I am again a guest on the podcast “Virziens”. Back then I was a Saeima deputy. Now — Prime Minister. The position is different, but the conversation is still open and on familiar terms. In four months you can get a lot moving, but you cannot remake a country in one go. Problems that have been accumulating for years cannot be solved with one loud statement or another “restart”. In this conversation we talked about things for which there are no easy answers: 💶 how to sort out state finances without pretending that the deficit will disappear on its own; ✈️ what is actually happening with airBaltic and why the state can no longer bear the whole burden alone; 🚆 how to finish Rail Baltica sensibly, rather than keep paying for past mistakes; 💻 why the state still overpays for IT solutions; 🏢 how to manage state companies more professionally and finally make capital work; ⚖️ why politics is not a business and why decisions there take more time; 👨‍👩‍👧‍👦 what the prime minister's job demands from a family and why in this position every day is Monday. Without slogans and embellishment. About what I have seen in four months, what we have started to change, and what still lies ahead. If you want to understand not only what the government is doing, but also — why, watch the latest “Virziens” episode. 👇 🎥 https://t.co/3faT9tGL9H