Vol 1, No 8, 16 August 1999
T H E A M B E R C O A S T:
Abrasive over Pensions
When Andris Skele returned to the prime-ministerial hot seat in Latvia on 16 July, everyone expected two things that they had learned from his past tenures. Firstly, Skele manages to deal with crises better than anyone else, forcing through some very difficult and controversial measures. Secondly, the methods used to achieve these said goals are, according to detractors, "undemocratic", "authoritarian", or "dictatorial". Needless to say, his style of leadership is considered abrasive at best. Though many political watchers feared a battle over the budget cuts, it failed to materialise. However, the infamous hand of Skele returned to full view, with the corresponding criticism, over the issue of amending the law on pensions.
Dealing with a crisis
No one in the country doubts that there is a crisis in Latvia's social services sector. The budget is severely in the negative, creating a massive strain on the government and state apparatus. Alhough the law on pensions seemingly faced amendment every year, the Skele-led government sought to implement several reforms to cure the sector of medium- and long-term woes.
The amendments offered by Skele have two distinct areas that attract controversy. First of all, the government targeted retirement age, which will be harmonised for both men and women to the age of 62 by 2006. As the retirement age for men is currently 60 and for women 57.5, the measure was designed to acheive a gradual transition towards the age of 62. This would bring Latvia closer in line with the West, even so this has attracted some controversy.
However, the most controversial aspect of the law concerns working pensioners. Under the new amendments, working pensioners earning more than twice the state pension would lose their simultaneous pension payments from 2000. By 2005, all working pensioners would lose simultaneous pension payments, regardless of their earnings level. This latter provision has drawn heavy criticism from groups representing pensioners, as well as from trade unions.
The amendments, however, were passed by a slight margin of 51 to 36 on 5 August 1999 in the Saeima (Parliament). Hundreds of protestors gathered outside the Saeima at several occasions calling for defeat of the measure. At times the protests turned against the mighty Skele himself, with calls for the prime minister's resignation, or even for his head. Skele, however, worked in his usual fashion and disregarded the protests and noise and got the job done.
Ensuing controversy with a referendum
In an attempt to derail the legislation, the left-wing opposition to the coalition government - the Social Democratic Workers Party and the movement For Human Rights in a United Latvia - filed a petition to delay the amendments' promulgation by two months. With President Vaira Vike-Freiberga on holiday and Saeima Speaker Janis Straume as acting president, the opposition took no chances, using what is considered the "last resort" in Latvian politics.
Latvia's constitution, the Satversme, is an anomaly in Europe, being one of the older continuous constitutions at over 75 years old. Both Estonia and Lithuania adopted new constitutions after the restoration of independence, but Latvia adhered to the same constitution passed in 1922. In the same way that the referednum plagued the government of the interwar years, the Satversme now opens the door to the same measure.
In delaying the amendments' promulgation, the opposition mustered more signatures than the required one third of the 100-member Saeima. During the two-month delay, if 10% of Latvian citizens sign a petition, a referendum on the measure would be called. Although the opposition has not made its opinions known on staging a referendum, several NGOs have made it clear that they will take up the campaign. This was the same procedure used during the amendments to the citizenship law, which went to a referendum in late 1988 (at the same time as the last general elections).
However, this time there would not be another election alongside the proposed referendum. This would mean incurring extra expense in staging the public vote. Various government departments offered estimates on the cost of staging the referendum at 1-2 million lats (USD 1.7-3.4 million), although most arrive at the consensus 1 million lats. Going back to the budget cuts made on the same day in the Saeima, the parliament approved a special 1 million lats earmark for the government's participation in the rehabilitation of the failed Rigas Komercbanka (RKB, Riga Commercial Bank). Thousands of Latvians lost deposits in the then-fourth-largest bank in the country, and the government's part in the rehabilitation is essential.
However, Skele was not shy in suggesting that if the amendments to the law on pensions go to a referendum, the 1 million lats earmarked for the RKB rehab would be needed to cover the referendum's costs. This was later reconfirmed by the Finance Ministry, which stated that there are no other funds available for such usage. The Central Election Commission clearly stated it had no such funds for a referendum, as 1999 is scheduled as a quiet year with no elections. But Skele's statement was quite clear: one plus one equals two.
However, that failed to stir any of the opposition MPs to change their minds, and the amendments were officially delayed on 11 August - thus launching the possible campaign for a referendum. Skele asked people not to sign any petitions, stating that the reforms are absolutely necessary. Feeling that the above threat had failed to work, the government on the same day diverted the necessary funds for the rehabilitation of RKB from an environmental grant designed for the clean-up of an old Soviet radar station site at Skrunda.
Skele is a master at resolving crises, but his style suits business more than it does government. Former disgraced Prime Minister Vilis Kristopans accused Skele of thinking that the Latvian state is like a company, where the head can do anything he wants. This refers, of course, to Skele's role as the sole owner of the Ave Lat conglomerate of food and drink producers, one of the largest Latvian business concerns, controlling a significant part of the entire market.
Latvia's collapsing social welfare system sorely needs the amendments. The changes provide relief down the line by starting necessary cost-cutting reforms now while Skele has the chance to push through unpopular measures. For example, if the retirement age is not changed, the number of pensioners could rise to 30% of the population in a few years. However, the strategy he is pursuing could easily backfire, if it endangers the social fabric of the country. If this turns into a public fight, the winners could be the Social Democrats.
Mel Huang, 16 August 1999
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