Latvian Political Monitor

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.

I tried the 'try on a party' robot. If you put all your wishes together, the robot chooses surprisingly well. But it's a bluff, because most (the vast majority) of wishes are such that cannot be realized purely objectively. Not at all. If you leave only what is financially theoretically possible (with the greatest effort in the budget), then the result is a meaningless cocktail. And so we vote and, as the shining insights from Twitter's wise ones show, we will continue to vote. And we still won't understand why good intentions meet reality and afterwards the insight is 'how come?'🫠 https://t.co/dBgUeFtIzC

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.

@aarrvviiss Honestly me too... so many services, institutions, competence centers have been created, but there's no result

@andrievs That is our people's tradition, mentality. It doesn't happen only at the ministry level. Anyone at any level defends their own trough. https://t.co/Nv0vMKM0ge

All three can be calmly merged into one. But will that automatically help? In municipalities it's the opposite. They significantly reduced the number, but the number of employees increased. It's everywhere. I remember when they discussed the problem of 2 schools in Saulkrasti. Everyone understands everything, but votes against. One deputy has a relative working in one, might lose the job. And there's always someone working somewhere. Each fights in their own microcosm for their own employment. Why not, if the salary is paid from someone else's money?🫠 Such a systemic tradition, stronger than burning tires on the solstice. And how to fight it, if we are like that and every place has its own bosses? Many are democratically elected, each fights for their own trough, for which they are also elected?

@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 case with the dogs is something terrible and such situations must not happen again. I feel for the victims and their families. Wishing a quick recovery! I will follow up to ensure that the PVD procedures regarding aggressive animals are carried out in accordance with the seriousness of the situation. https://t.co/EKdbvHxRKa

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.

Starting from the situation with inheritances from the previous government – 'Air Baltic' and 'Rail Baltica', and ending with pensions and pay for deputies… We had a heart-to-heart talk about such a wide range of issues with entrepreneurs and seniors, meeting in Talsi. Thanks for the meeting and the constructive conversation! https://t.co/iQOLdTNUia

@reihskanceleja @Lato_Lapsa @AndrisKulbergs Don't take away the man's bread, Jānis. He was paid for this, but the ass is not meant for sex, it hurts. Suffer and vomit.

DECISIONS AFTER THE STORM Electricity disappeared for 280,000 households, communications disappeared, radio didn't report, coordination was weak, payment systems didn't work, ATMs didn't work, medicines couldn't be sold even if there was electricity because data systems didn't work. That was the reality, where even the energy crisis state wasn't declared. We gathered yesterday for a meeting to decide what needs to change to be more prepared - we heard from the KVC (Crisis Management Center) and services. We immediately adopted 12 urgent decisions to improve readiness so that the next storm/crisis situation wouldn't catch us so unprepared. (I don't really understand what the state has been doing all the previous 4 years) = GOOD NEWS - electricity damage (over 2000 cases) was cleaned up very quickly (Lithuania with a smaller number is still fighting with thousands of unconnected homes); all hospitals worked without electricity disruption, generators worked 🟠Latvia must create a unified, practically functioning crisis management system, where the state, municipalities and critical service providers operate according to a common plan. (Example should be taken from Ukraine, where all services are in a unified system) 🟠The protective belt widths of AST and ST power line trees must be increased so that there aren't so many damages. 🟠The mobile network must work not 4 hours without electricity, but at least 72 hours, voice calls need better coverage, in crisis situations Latvian users must be able to have local roaming between operators. 🟠Offline, or non-online mode, must allow payment for fuel, food, medicines for both businesses and individuals with cash or credit card. 🟠Ensuring continuity of communications and electricity, creating a unified information channel and organizing regular training, during which we will inventory crisis resources and ensure our readiness. 🟠I want to emphasize that crisis management training must be regular. And of course, still important – timely and unified communication. Because creating an information channel will have no result if we cannot promptly and professionally inform the public. 🟠Old, outdated limits must be reviewed – cash transactions, the tiny liters of fuel, etc. 🟠Residents have been asked for years to prepare for 72-hour situations. The same readiness principle must apply to the state, municipalities and critical public service providers. In some sectors, the necessary autonomous operation time could be longer than 72 hours, according to risk assessment. 🟠 KVC work must be significantly improved. The Crisis Management Center must compile proposals from sectors and come with concrete solutions to the government in the areas discussed today. https://t.co/qnnUjGTXhm

Yesterday, on September 5, a serious incident occurred during a walk of the preschool "Riekstiņš" pupils, in which six children were injured. A group of 19 children, accompanied by a teacher and a teacher's assistant, had gone on a previously agreed walk outside the educational institution's territory, following the approved walking route. During the walk, two unsupervised dogs approached the group of children from the end of Lašu Street. According to information provided by the institution, six children were injured in the incident, two of whom were hospitalized. One of the teachers accompanying the children was also injured. Four administrative violation proceedings have been initiated in connection with the incident. The Food and Veterinary Service (PVD) has been informed and will take action within its competence regarding the assessment of the dogs. The municipality is cooperating with the police, the Food and Veterinary Service, and other responsible services to clarify all circumstances and assess necessary further safety measures. After the police's procedural actions, the dogs were handed over to their owner. https://t.co/xHOtQmRb3g