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Wednesday 28.09.2016 | Name days: Sergejs, Svetlana, Lana
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Economic Diary of Latvia. Double standards system in action

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe main events of this week can be described as ‘the double standards system in action’. First of all, it turned out that Latvia’s minimum wage rate is not equal to all. Secondly, it became known this week that Latvia’s government supports maintaining sanctions against Russia with one hand and put efforts to improve economic cooperation with the same Russia with the other hand.

We learned this week that there is a minimum wage rate for the majority of the population and a special minimum wage rate for certain employees of the government.

Since January 2016, the minimum wage rate for mere mortals in Latvia has been EUR 370 a month. The proposal voiced this week at the beginning of talks about the state budget for 2017, regarding the possible increase of the minimum wage by EUR 10, did not receive any clear political support. Representatives of business organizations had even blasted this proposal with a wave of criticism.

The proposal voiced by Welfare Ministry to raise minimum wages by EUR 37 to EUR 407 was immediately attacked by economists of the Bank of Latvia Ludmila Fadeeva and Oleg Krasnoperov. They believe the increase of minimum wages from EUR 400 to EUR 410 starting from January 2017 would make the ratio between minimum wages and average wages one of the highest in the EU.

Nevertheless, the government did order on Thursday to increase minimum wages by EUR 10 to EUR 380 starting from 2017. The effect this will have on the state budget is estimated at EUR 11.76 million.

As confirmed by Prime Minister Maris Kucinkskis, this decision was made after the meeting between politician of the ruling coalition and representatives of the Latvian Employers’ Confederation and Latvian Chamber for Commerce and Industry.

According to the latest data from the Central Statistical Bureau of Latvia, in Q2 2016 there were 898.5 thousand employed people in Latvia aged 15 to 74. 20.9% of them are paid minimum wages. In addition, the matter regarding efforts to increase wages of teachers, doctors, police officers and court workers remains as topical as ever.

At the same time, however, the proposal voiced by Finance Minister Dana Reizniece-Ozola to increase the wage of the head of the State Revenue Service to EUR 8,100 a month, was met with approval from partners of the coalition.

Reizniece-Ozola believes: if a new personnel selection process is launched to pick a new manager for SRS, there have to be new game rules.

The current wage of the head of the aforementioned institution is EUR 3,417 a month (before taxes).

Only ombudsman Juris Jansons, commenting on the proposal of the Finance Minister, called it absurd, inadequate, torn out of context and unjust towards other residents of the country.

Vacation diplomacy

Another strange story that was widely reported this week is related to the meeting of several ministers from the Union of Greens and Farmers with Russian Vice-President Arkady Dvorkovich, who was spending his vacation in Jurmala last week. He also held a meeting with Mayor of Riga Nil Ushakov before the aforementioned meeting with ministers. But while the meeting with Ushakov was announced in the media in advance, the only reason why the media even found out about the informal meeting is that it was reported by skaties.lv portal. The Internet portal reported that Dvorkovich held a meeting with Finance Minister Dana Reizniece-Ozola, Transport Minister Uldis Augulis and Agriculture Minister Janis Duklavs at Karavela fish processing plant last week.

The fact of the meeting was later confirmed by Reizniece-Ozola. She said that officials discussed the topic of cancellation of sanctions for fish processing companies and the situation with Incukalns gas storage facility.

The meeting was also organized without the involvement of Latvian Foreign Affairs Ministry. Duklavs told the portal, the organizer of the meeting is Russian ambassador in Latvia Aleksandr Veshnyakov.

Soon after, other interesting details started surfacing as well. As it turns out, Prime Minister Maris Kucinskis knew about the meeting. He also supports efforts to improve economic relations with the nearest neighbours. The day the meeting took place, however, he was on vacation.

Duklavs was on vacation as well. He wanted to discuss the meeting with members of the ruling coalition, but did not – he was on vacation. After returning to his duties, Duklavs announced that it is important for Latvia to build good economic relations with other countries, especially its nearest neighbours – Estonia, Lithuania, Belarus and Russia.

Foreign Affairs Minister Edgars Rinkevics announced that the ministry supports efforts to resolve practical matters with Russian representatives. Nevertheless, Latvian officials have to comply with the order established by the government to govern meetings with foreign officials. This is why the ministry expects a detailed report on the topics discussed during the aforementioned meeting with the Russian official.

Unfortunately for Reizniece-Ozola and Augulis, neither of them was on vacation at the time. Because of that, they had to take all the ‘heat’. The Transport Ministry reported that Augulis discussed matters related to transit and railway transports. The institution added that the minister had previously met with third country officials to discuss transit matters.

The Finance Minister reported that she and Dvorkovich discussed the possibility of restoring exports of fish products to Russia. «In regards to sanctions, the involved sides have strict requirements. Fish are a different case, as decisions were made outside of boundaries of general sanctions. This is why we wanted to see if there are conditions for restoration of exports,» – Reizniece-Ozola added.

 What else?

Fortunately, there were events that cannot be kept secret. Intense rainfall was the main event this and the previous week. Because of rainfall, Latvia was forced to halt its harvests of grains.

Harvests have yet to begin in certain regions in Latgale. Because of intense rainfall and efforts to dry the grains, expenses are expected to grow by at least EUR 25 per 1 ton, as reported by representatives of grain cooperatives.

According to Director General of Latraps Edgars Ruza, grains in Zemgale were not being harvested at all this week. So far, grains have been harvested on 50% of territories in Latvia.

«The soil is so drained in water our machinery cannot drive to the fields to harvest grains. Two tractors accompany harvesters to pull them back if anything happens. Trailers with grains cannot leave fields,» – he added.

According to him, stems are too wet and the harvested grains are only fit to be used as animal feed.

At the beginning of August, Agriculture Ministry’s Market and Direct Support Department reported that this year’s volume of grains may reach 2.544 million tons.

According to the latest data from the ministry, although this year’s harvests are expected to be lower than previously estimated, the record of average harvests will likely be beaten. It is estimated that there will be 44.9 quintals of grains harvested from 1 ha on average.

Prices on grains are not too optimistic as well – they continue to reduce, which is related to good harvests in most European countries.

For example, the price of wheat in Latvia has declined 26% in June 2016 in comparison with May 2015.

Ref: 017.109.109.6872


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