According to the Rīga-based newswire, Rinkēvičs said that many of the problematic aspects highlighted during the debate today were essential and the Foreign Ministry, the government, and the parliament would have to deal with them when considering Latvia’s national interests in the EU and NATO context.

The foreign policy debate next year probably would be even more interesting and intensive, BNS reported, as the country’s priorities for the EU presidency and more detailed defining of foreign economic interests would be discussed, Rinkēvičs said.

According to BNS, Rinkēvičs thanked the Latvian lawmakers for active participation in the debate, saying that they had demonstrated high-quality debating and understanding of the foreign policy matters.

The second annual foreign policy debate took place at the Latvian parliament on January 27, BNS reported. Nearly 30 lawmakers spoke during the debate, but Rinkēvičs took floor four times, including the opening speech. Latvian parliament speaker Solvita Āboltiņa and Defense Minister Artis Pabriks also participated in the debate.

Link to full text of Rinkēvičs speech: http://www.mfa.gov.lv/en/news/speeches/2012/01-26/.

According to the Rīga-based newswire, Kalniņš said Latvia’s foreign policy priorities have not changed since the previous foreign policy debate in parliament a year ago, and they are based on the development of the national economy and protecting Latvia’s interests in the EU.

What has changed over the past year, BNS quoted Kalniņš as saying, is that Latvia has managed to overcome the crisis and now has to help tackle the crisis on the European scale, protecting at the same time its own interests in the context of the EU budget and farming subsidies.

According to BNS, Kalniņš indicated that on the international arena it is also necessary to reckon with Europe’s southern neighbors, because the Arab Spring, which saw the departure of former Egyptian and Tunisian leaders, “has brought about certain change.”

Kalniņš said that as a NATO member Latvia must continue to meet its commitments in Afghanistan, whose economic growth can be tied to the New Silk Road, which crosses Afghanistan, BNS reported. By carrying on with its work, Latvia will be able to maintain its leading position in this international project.

According to BNS, the chairman of the parliament foreign affairs committee also noted lawmakers’ task to ratify amendments planned to the Lisbon Treaty and new agreements aimed at strengthening Europe’s fiscal discipline.

“If we hope to secure support for farmers, we must help strengthen Europe’s financial stability, which is the foundation of our common economic growth,” the MP was quoted as saying.

Contributing to the discussion were the Ambassador of Latvia to Kuwait, Ilgvars Kļava, the Ambassador of Kuwait to Latvia, H.E. Dr. Musaed Al-Haroun, and, via video conferencing facilities, also the Ambassador of Latvia to the United Arab Emirates, Māris Selga. The ambassadors briefed the participants about the market profile of and export opportunities in the respective states.

Supporting Latvian exporters’ efforts to enter markets in the Gulf region, the Ambassador of Latvia to Kuwait indicated that “it is vital that entrepreneurs with serious intentions of launching their operations in the Gulf States ensure the presence of their representative in the region.”

The Latvian Ambassador to the United Arab Emirates, Māris Selga, talked about export opportunities to the Emirates and accentuated that “Latvia’s businesses should seek support more actively from the Chamber of Commerce.”

As part of the discussion, the participants heard the Foreign Ministry presentation on Latvia’s economic cooperation with Qatar. The export manager of SIA Evopipes, Māris Melderis, shared the company’s experience to date in cooperation with the Gulf States.

The Ambassador of Kuwait to Latvia, H.E. Dr. Musaed Al-Haroun, encouraged Latvian businessmen to develop cooperation with Kuwait and accentuated that it was important to visit the country in order to build direct contacts with representatives from relevant sectors.

The Ministry of Foreign Affairs organizes the round table in association with the Latvian Chamber of Commerce and Industry. This was the first event in this year’s series of discussions, “Foreign Service for Latvia’s Exports: Entrepreneurs meet Latvian Ambassadors,” which offers an opportunity for entrepreneurs to establish direct contacts with ambassadors abroad and get regular access to the information that Latvian ambassadors have collected and processed to enable its broad use toward promoting economic growth.

The next round table, to be held on February 15, 2012, will deal with Latvian-Japanese trade.

“Our countries have many interests in common, including, in the area of the cohesion policy and distribution of direct agricultural payments,” stated Ambassador Šepelák. He congratulated Prime Minister Dombrovskis on the occasion of conclusion of the international loan and expressed readiness to continue joint work to contribute also to economic growth, including promoting investments and trade relations.

The prime minister emphasized that the cooperation between the Baltic States and the Visegrad group countries – the Czech Republic, Slovakia, Hungary, and Poland – has great potential and Latvia is ready for active cooperation within the framework of this format.

Discussing the bilateral political dialogue, the prime minister expressed satisfaction over the visit of the prime minister of the Czech Republic, Petr Nečas, to Latvia planned this year, within the framework of which the parties will continue to look for new opportunities to promote closer cooperation at the officials’ level and at business level.

The Secretary of State and Ambassador exchanged opinions on the current economic situation in the European Union Member States, and Teikmanis accentuated Latvia’s support for a more rigorous fiscal discipline.

H.E. Giovanni Polizzi succeeded the former Italian Ambassador Francesco Puccio and was accredited on October 25, 2011. Polizzi has been a career diplomat since 1974.

“Next year the president will have many activities in foreign relations. The presidents of Estonia, Macedonia, Croatia and Georgia are expected to make state and official visit to Latvia,” she was quoted as saying.

According to BNS, Bērziņš also plans to take part in several international forums: the meeting of eight presidents of the so-called Arraiolos group debate in Helsinki, the NATO Summit in Chicago, the EU-Latin America Summit in Chile, and the UN General Assembly in New York.
BNS reported that Bērziņš has also planned to meet Latvia’s main cooperation partners within the Baltic Sea region, Germany and Poland.

A decision still has to be made on the president’s participation in opening of closing ceremonies of the Olympic Games in London.

According to BNS, Krapāne said that some activities are still being coordinated with partners, therefore more detailed information about the president’s agenda will be released early next year.

“The people of Latvia have done an enormous work and shown great patience in the context of budget cuts, refocusing the economy on exports, as well as other reforms, thus setting an example for other countries which are also faced with the task of sorting out their finances and restoring competitiveness,” Inna Šteinbuka, head of the European Commission’s Representation in Latvia, was quoted as saying.

According to the Riga-based newswire, the Supplemental Memorandum of Understanding contains new commitments taken by Latvia that are supposed to bolster its economy and ensure acceptable borrowing costs in case Latvia needs to borrow financial markets. The government’s commitments are concerned with budget and fiscal discipline, social policy issues, the restructuring and sale of state-owned bank, as well as other tasks aimed at combating the shadow economy, enhancing public administration, reducing long-term unemployment, improving the management of state-owned companies and properties, as well as competition and procurement procedures, among other issues, BNS reported.

According to the Memorandum, Latvia is expected to take further budgetary measures both on the revenue and expenditure side in 2012.

On the revenue side, BNS reported, the Latvian authorities are expected to improve tax compliance by cancelling interest and fines on unpaid taxes to facilitate the collection of these tax claims. The fiscal effect of these measures is projected at 15 million lats (EUR 21.34 million). The regulation of the gambling industry must also be enhanced, which is expected to ensure additional 700,000 lats (EUR 996,015) revenue.

The VAT base has to be broadened, BNS reported, including by applying reverse VAT on scrap metal and construction, which should ensure revenue of 9.6 million lats (EUR 13.65 million). The base of property taxes also has to be broadened, allowing local authorities to lift the 25 percent caps on the annual property tax increase, which is expected to provide additional 3.5 million lats (EUR 4.98 million).

According to the Memorandum, as cited by BNS, Latvia has to improve the taxation of small and micro enterprises by ensuring that the general personal income tax regime is applicable to personnel provided by large companies to microenterprises to minimize their tax liability. The effect from these measures is projected at 2.7 million lats (EUR 3.84 million).

The rate of the financial stability levy should be raised from 0.036 percent to 0.072 percent, which is expected to provide another 2.7 million lats (EUR 3.84 million) revenue.

On the expenditure side, BNS reported that the Memorandum calls for drawing up a new strategy on public administration. This strategy should normalize the distribution of employees and ensure centralized control over the creation of new posts. The government is expected to come up with proposals to reform the pay system in order to make it fairer toward low-paid employees, stimulating the best employees and attracting highly-skilled people. The wages for higher positions should be set closer to private sector levels.

According to the Memorandum, as cited by BNS, Latvia is also expected to take measures to reduce local authorities’ expenditure, including by restricting their borrowing possibilities and cutting the share of personal income tax revenue, which is paid to municipal budgets, to 80 percent from 82 percent.

Road maintenance costs and subsidies to public transport operators have to be slashed as well in order to save 10 million lats (EUR 14.22 million) and 5 million lats (EUR 7.11 million) respectively, BNS reported.

Also, subsidies to farmers have to be reduced by 1.2 million lats, the Interior Ministry is expected to cut its expenditure by 1.2 million lats (EUR 1.7 million), and the Health Ministry is expected to save 2.7 million lats (EUR 3.84 million).

BNS reported that next year, the government is expected to take decisions that will take effect in 2013. By September 2012, the government has to reform state family benefits and the social assistance system to improve targeting to the poorest families.
Caps on maternity, paternity, parenting, unemployment, and sickness benefits will remain in place until the end of 2014.

According to BNS, the Memorandum also sets forth an action plan for a clampdown on the grey economy, which includes implementing the zero declaration of income.
The European Commission will be following the implementation of these measures within the post-program surveillance framework, which will continue until Latvia repays about 70 percent of the EU loan.

According to BNS, the European Commission’s Representation in Latvia noted that in the framework of the program, which began in 2009, Latvia has managed to return to economic growth, which in the third quarter of this year reached 6.6 percent. Already in the summer of 2011, Latvia proved that it has regained the confidence of international financial markets by selling USD 500 million (EUR 382.37 million) worth of government bonds. Unemployment has dropped from 20 percent at the peak of the recession to 14.4 percent, BNS reported.

Bērziņš also said that he is convinced that the Baltic states are prepared for any upcoming economic upheavals in Europe. During the years of the crisis, they implemented many important structural reforms, cut expenditures, took many serious decisions to bring greater order to the financial sector, and did other things to offer additional guarantees of the fact that if there are new financial upheavals, the Baltic states will do much better in overcoming them than might have been expected in the past.

President Bērziņš went on to say that energy projects in the Baltic states must be evaluated and considered jointly: “Our future lies in joint projects, at least at the level of the Baltic states.” While meeting with the presidents of the Baltic states and Poland, Bērziņš said he discussed issues related to security in the region, budget expenditures on defense, preparations for next year’s NATO summit in Chicago, and aspects of energy issues and the EU’s Eastern Partnership program. At the conclusion of the meeting, the European Commission’s vice president, Siim Kallas, provided a review of transport projects during the next EU financial period, including financing issues and, particularly, the Rail Baltic project in the Baltic states and its importance.

Among major security policy issues that were discussed by the presidents was the need to continue NATO patrols in Baltic airspace, perhaps turning this process into a permanent mission. President Bērziņš told his colleagues about his recent visit to Afghanistan, where he met with senior allied commanders in the Northern region. Bērziņš said that he gained an all-encompassing understanding of the situation in the region where Latvian soldiers are posted. He also believes that after NATO transfers power to the Afghans, it will not abandon the country; instead, it will continue to train Afghan forces. Bērziņš said that he is sure that Afghanistan will continue to need support in various humanitarian areas for a long time to come.

The discussion about regional security also focused on defense financing as a part of GDP. Because of the economic crisis, the proportion of financing in Lithuania and Latvia has declined considerably – to 1.1% of GDP in Latvia and 0.85% of GDP in Lithuania. In this context, Estonian President Toomas Hendrik Ilves called for increased financing in future years. President Bērziņš has said in the past that Latvia will increase defense spending along with economic growth. He added at the news conference that although Latvia has cut its defense budget, the fact is that NATO defense policy planners have very much welcomed reforms in the country’s defense sector – reforms which have made it possible to maintain the battle capacities of the National Armed Forces, as well as to reduce administrative costs and make them more effective.

On December 2, Prime Minister Valdis Dombrovskis and Prime Minister of Lithuania Andrius Kubilius in conversation confirmed that the Visagina Nuclear Power Plant (NPP) will be an economically viable and advantageous project for the people of the Baltic States.

The most important prerequisite of Latvia for the construction of the Visagina NPP has been the expected economic benefits of the project. According to calculations, electricity produced by the Visagina NPP will be competitive in the Baltic Nord Pool Spot market. Thereby, Latvia confirmed its readiness to move forward in implementing this project.

Part of the NPP construction works will be entrusted to the local Baltic companies, including the Latvian entrepreneurs who will have an opportunity to participate in construction works of the Visagina NPP.

During the meeting, the prime ministers also exchanged the information on the situation in Snoras bank and Latvijas Krājbanka. Currently, the operation of the two banks is suspended and the deposits in guaranteed amount will be paid to depositors.

Thereby, at the present moment, it is most important to focus on the reduction of negative effects in economics. Similarly, when assessing potential investments in future, particularly in the financial sector, special attention should be paid to true intentions and quality of investors.

Kubilius informed the Latvian Prime Minister of Lithuania’s economic growth forecasts: Lithuania has reduced the projected GDP growth rate for 2012 to 2.5%, i.e., to the level projected in Latvia. The budget deficit of Lithuania would be 2.8% of GDP.

Within the framework of the visit, the parties also addressed the next financial framework of the European Union, where both countries have similar priorities: to achieve fair conditions for direct agricultural payments and ensure sufficient cohesion funding. In addition, the parties have stated that both Latvia’s and Lithuania’s greatest concerns as to the next year are related to the situation in the euro zone. All three of the Baltic States are closely affected by the developments in the euro zone; therefore its stability is crucial for both countries.

During the visit, the prime ministers also signed a report on the prospects for cooperation between Latvia and Lithuania. The prime ministers confirmed that relations between Latvia and Lithuania are close, positive and constructive, including in the area of culture, education, energy and transport.

On November 24, Latvian Foreign Minister Edgars Rinkēvičs met with the Ambassador of Sweden to Latvia, Mats Staffanson, to discuss the visit to Rīga by Swedish Foreign Minister Carl Bildt on November 28. The parties emphasized the intensive Latvian-Swedish political dialogue, a proof to that being a broad exchange of visits high-level.

Foreign Minister Bildt’s visit was planned when Rinkēvičs was appointed Foreign Minister. The agenda of the visit includes current issues in bilateral relations, regional cooperation, the European Union’s Eastern partnership, and EU enlargement.

The Foreign Minister of Sweden was one of the first among the foreign colleagues to congratulate Rinkēvičs on taking office as Foreign Minister of Latvia.