Austerity measures provoke protests

Latvia’s programme for stabilising its financial system is based on widespread austerity measures. During the first two years of austerity, the annual deficit led to the government aiming to cut spending by 4% of gross domestic product, with a reduction of more than 2% in 2011. These measures have almost exhausted possibilities for more cuts, and the government’s suggestions for further measures have been increasingly met by national protests, supported by unions and employer organisations.

Background

A rapid austerity programme has been implemented in Latvia since the second half of 2008, when the government asked the International Monetary Fund (IMF) and the European Commission (EC) for help in stabilising its financial system,. The national budget for 2009 initially did not contain any austerity measures. However, it was amended twice, once before local government elections, when the government announced a targeted adjustment of €82.5 million, and immediately after the elections, when the government increased its target reduction to €711.4 million. In 2010, the deficit was reduced by €711.4 million (4.2% of GDP). In 2011, the government aims to reduce it by €426.9 million (more than 2% of gross domestic product (GDP)). To begin with, the targets were achieved mainly by reducing expenditure. However, in 2011, two-thirds of the deficit reduction were achieved by raising taxes. These increases, combined with a decline in consumption, created a sharp economic decline.

The rapid pace of the austerity measures has led to a shortage of resources. Increasingly, the government’s recommendations are followed by protests. At the beginning of 2011, a wave of protests was triggered after the international lenders told the government to increase their target budget reduction by €71.1 million (LV1101019I). The government plans to obtain almost 80% of this amount by raising taxes, and the rest by decreasing state budget expenditures.

Reform of medical clinics fails

In January, protests began on account of the unexpected proposal to change the availability and financing of medical clinics. These changes were part of reforms in the healthcare system, which was intended to save the State €569,200 (0.009% of the total consolidated state budget). On 28 December 2010, the government decided that as of 1 January 2011, financing of clinics would depend on the number of patients. Clinics would be open only on weekday evenings, at night, and during public holidays. During the day, medical treatment would be available from family doctors and hospitals, which would have to use their existing budgets to cover the cost of treating additional patients – or patients themselves would have to pay for treatment.

This proposal would drastically reduce patients’ access to treatment at clinics, particularly in rural areas where, as a result of reforms, hospitals have been closed, and doctors’ surgeries are open only for a few hours during the day. The measure would also mean that doctors at first aid stations would be in enforced idleness during the day, whereas family doctors and hospital doctors would have to work much harder, for no extra pay.

At the beginning of January a meeting between the heads of hospitals and the Minister of Health was unsuccessful. This led to the Association of Healthcare Institutions (MIB) along with the Association of Hospitals of Latvia (LSB) to begin drafting a request for the resignation of Juris Barzdins, the Minister of Health. However, the situation was resolved with the intervention of President Valdis Zatlers, former head of the Hospital of Traumatology and Orthopaedics (TOS). It was agreed to reconsider the proposed changes and to delay their implementation until May 2011. On 26 April 2011, the Cabinet of Ministers prolonged the reconsideration period until 1 June 2011.

Police protest again

When a number of serious crimes by the police was revealed at the end of January, Linda Mūrniece, the Minister of the Interior, initiated a comprehensive study of all police stations. Agris Sūna, head of the United Police Trade Union of Latvia (LAPA), called this a witch-hunt, and the union protested against the threat to several thousand police jobs as a result of this examination. LAPA challenged the ban on working 24 hour shifts, and new regulations which decreed a maximum 12-hour working day. The union insists that, since police wages are not high, their members are forced to take on second jobs, and that this is made possible only by working a 24–hour shift, followed by three days off. Extra employment would not be possible for those working 12 hours with less holidays. However, only about 50 people participated in the protest meeting on 8 February 2011.

Manufacturers are also dissatisfied

More than 1,500 employees in the drinks trade protested on 24 February 2011 about an increase in excise tax on strong alcoholic beverages. The action was organised by the Association of Latvian Spirits Producers and Distributors (ARTA). It consisted of a 30–minute stoppage of manufacturing alcoholic drinks; and a closure of liquor stores and related offices at the same time. Demonstrators contended that raising the excise tax on alcoholic beverages would encourage bootleggers, who already constitute a sizeable part of the shadow economy. The trade argues that raising these taxes will not yield additional income for the state budget, because excise taxes on alcohol have declined from year to year.

Students protest

Hundreds of students and teachers took part in a protest, dubbed Pastaiga-2, organised by the Latvian Art Academies Association (LMAA) on 25 February 2011. They were demonstrating against the government’s proposals to cut, by 60%, the number of state-financed study places in state art colleges. Protestors included many politicians from radical parties, as well as Pēteris Krīgeris, Chair of the Free Trade Union Confederation of Latvia (LBAS).

On 28 February 2011, students from the Faculty of Physics and Mathematics at the University of Latvia created a graphic design on the ice of the Daugava River in the centre of Riga, calling for the use of open-source programming. In this way, the government would save money, and it would not be necessary to reduce the number of state-financed study places at Latvia’s higher education institutions. The students’ campaign was a reaction against the planned 10% reduction in state-financed study places (600 places) as of 1 September 2011.

As a result of the students’ protest campaign, the government promised not to reduce the number of state-financed study places.

Passenger carriers and farmers protest

A protest organised by the Latvian Passenger Transport Association (LPPA) and the Latvian Trade Union of Public Service and Transport Workers LAKRS (LAKRS) was held on 24 March 2011. The Latvian Association of Local and Regional Governments (LPS) also supported the protest. They are concerned that the proposed reduction of 235 intercity routes and 570 rural routes, plus the closure of bus terminals, will mean job losses for drivers, and will hamper rural inhabitants getting to jobs in cities. The protest was sparked by the government’s decision to cut financing for public transport by €4.3 million more than is already projected in the budget for 2011. This would mean a reduction of 21% in state financing for passenger carriers in 2011. The financing would be 30% less than in 2008.

The Ministry of Transport has shown that, without the planned reduction, there will be a deficit of €5.1 million in its budget. The state-run rail service LDz did not plan to participate in the protest, saying that such a campaign would not stop the cuts, and could cause losses in revenue for the company.

Viewpoint of social partners

Trade unions are allowed to participate in discussions of austerity measures before they are implemented; however, their viewpoint is usually not taken into account. This is why not only sector labour unions, but also LBAS, supports and uses protest actions as the only means of influencing the government’s policies. Employer organisations also participate in protests.

Commentary

So far, protests have not been held about violations of employees’ rights or the decline in working conditions. Nevertheless, these phenomena are significant, and the availability of education and healthcare has also markedly worsened as a result of the austerity measures. A deterioration in living conditions and loss of employment could encourage emigration and, in turn, that may potentially deplete the state budget even more as the tax base is eroded.

A number of changes with regard to taxes were planned for 1 June 2011. The matter of reducing the number of police officers is still on the agenda and can be expected to cause a new wave of protests in midsummer.

Raita Karnite, EPC Ltd.

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