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Monday 20.11.2017 | Name days: Anda, Andīna

Vilks: UGF’s proposal to think more about spending could serve to ruin the government

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUIt has become popular to write off almost all expenses of Latvian ministries as measures to strengthen state security. This is done specifically to make it hard to oppose them. This applies to wages of fire fighters, postmen, railway workers, road maintenance expenses, teachers’ wage reformation and possible raising of minimum wages in Latvia.

Ministers often mention measures to combat shadow economy as the chief solution to all expenses. Nevertheless, multiple well-written plans have been delayed. For example, Finance Ministry had asked Saeima deputies to reform the Law on Commerce last year. This was proposed in order to prevent tax fraudsters from using firms registered behind fictive names abroad. Instead, foreigners wishing to register would have to personally come to the Register of Enterprises to do all the paperwork – this was the suggestion provided by the ministry. This year’s budget has a total of EUR 6 million intended to help fix this flaw. Unfortunately, Saeima deputies decided to oppose this intention, as reported by Nekā personīga programme.

EUR 32,642,776 had been divided in the first months of 2015 for state emergencies. It is stated in requirements of the Cabinet of Ministers that this money is intended for covering damages done by natural disasters. However, it seems the ministry does not intend to follow its own rules.

Culture Ministry requested a total of EUR 201,000 to be allocated from the money for emergencies to organize the 25th anniversary on May 4th. EUR 5.5 million were divided to maintain the current rate of micro-enterprise tax. Justice Ministry has requested EUR 430 thousand to pay for equipment for State Forensic Science Centre. 35 requests have been satisfied using money originally intended for emergencies.

«Unfortunately, every other meeting I have missed so far has included matters regarding money intended for emergencies. I have not taken part in meetings that discussed these matters. I believe it is wrong to have reserved all of those funds. As far as I can understand, the government has decided that ministries would pool their resources should an actual emergency arise,» – said Finance Minister Janis Reirs.

The Prime Minister has said that ministers had been offered to retain 1-3% of budget money and hand it to those who can offer new options for the state to increase revenue or improve service quality. Ministers did not support this intention.

Fiscal Discipline Council recommends ministries to drop unreasonable financing requests next year. This council was originally formed during Valdis Dombrovskis’ government. The council includes representatives from the Saeima, Finance Ministry and Bank of Latvia. Janis Platais, Chairperson of the Council and consultant to the International Monetary Fund and potential candidate for the post of Prime Minister and Finance Minister of Latvia during crisis years, believes the amounts ministries request from the budget are too large.

«Ministries’ wishes to spend money are incredibly large. We do not see any options how their desires can be balanced with resources currently available in the state budget. […] According to information available to the Fiscal Discipline Council, ministries want an additional EUR 700 million to cover expenses in 2016. This is a very large amount,» – said Platais.

«I cannot remember a single year in which money intended for emergencies had run out just as quickly. Ministers now see this as completely normal. I remember 2009-2011 was a very hard period for us. Ministries had requested money then as well. But there had been a meaning to the name finances for emergencies at the time. Now it is used as an option. […] This is a very bad situation,» – believes former Finance Minister of Latvia Andris Vilks.

Vilks recalls the Union of Greens and Farmers had been against euro in Latvia. He had also heard proposals from UGF to think less about austerity and more about spending. Vilks mentions this as one of the reasons why Straujuma’s government is at risk of collapse.

He warns – the worst thing that could happen is for Latvia to have a large budget deficit. This would only worsen relations with Europe. International credit rating agencies could take action as well and reduce Latvia’s positive index. This would be a signal to investors that Latvia is not a good business partner.


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