Searching European Identity Latvian Searching European Identity Latvian 3rd Year of Membership in the 3rd Year of Membership in the

European UnionEuropean Union

AndAndzzs Ubeliss UbelisMSC Eco. student Cardiff UniversityMSC Eco. student Cardiff UniversityDeputy State Secretary, Ministry of Deputy State Secretary, Ministry of

Finance, Republic of LatviaFinance, Republic of Latvia

EPRCEPRCGlasgow, 20 March, 2007Glasgow, 20 March, 2007

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Content of PresentationContent of Presentation

I.I. Past - EU accession – success storyPast - EU accession – success story

II.II. Present - Resume after 3rd year in Present - Resume after 3rd year in EUEU

III.III. Future – in the search of new Future – in the search of new European identityEuropean identity

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I. I. EU accession – success storyEU accession – success story

9 years of reforms (1995-2004)9 years of reforms (1995-2004)

economic transitioneconomic transition (Free Trade Agreement with EU, (Free Trade Agreement with EU, Russian crises Russian crises 1998) 1998) and shifting trade from East to and shifting trade from East to WestWest

market liberalisationmarket liberalisationharmonisation of the legislationharmonisation of the legislation building institutions and improving governancebuilding institutions and improving governance

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I. I. EU accession – success storyEU accession – success story

Accession processAccession process

proving commitment for reformsproving commitment for reforms getting on a fast track – escaping from the group of getting on a fast track – escaping from the group of

2007 enlargement (1999 Helsinki)2007 enlargement (1999 Helsinki)

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II. II. Resume after 3rd year in EUResume after 3rd year in EU

Status of a new member stateStatus of a new member state

newcomers in an old club – EU15 vs EU10 (EU12):newcomers in an old club – EU15 vs EU10 (EU12): EU6 vs Cohesion countriesEU6 vs Cohesion countries Donors vs Beneficiaries Donors vs Beneficiaries Liberal economies vs Social Model Liberal economies vs Social Model

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II. II. Resume after 3rd year in EUResume after 3rd year in EU

Costs and BenefitsCosts and Benefits

good financial package for 2007-2013 good financial package for 2007-2013 little success with EU agenda (constitution, legislation little success with EU agenda (constitution, legislation

on free movement of services)on free movement of services) limited influence at European scale: limited influence at European scale:

only one clearly visible political leader from Latvia only one clearly visible political leader from Latvia on European / International scene on European / International scene

poor representation in EU institutionspoor representation in EU institutions joining Euro zone becomes a challenge joining Euro zone becomes a challenge

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II. II. Resume after 3rd year in EUResume after 3rd year in EU

Baltic tiger walking on the edgeBaltic tiger walking on the edge

high real GDP growth rates (10% and more)high real GDP growth rates (10% and more) inflow of FDI and capital inflow of FDI and capital

high inflation high inflation current account deficit current account deficit indebtedness indebtedness risk of overheatingrisk of overheating risk of devaluation of national currency and financial risk of devaluation of national currency and financial

crisiscrisis

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II. II. Resume after 3rd year in EUResume after 3rd year in EU

Baltic tiger walking on the edge Baltic tiger walking on the edge Macroeconomic policy “trap” for the Macroeconomic policy “trap” for the Government and the Central BankGovernment and the Central Bank

EU accessionEU accession economic growth economic growth higher demand for labour higher demand for labour higher higher wages wages higher prices higher prices inflationinflation

EU accessionEU accession agenda for joining Euro zone agenda for joining Euro zone pegging pegging Latvian Lat to Euro Latvian Lat to Euro the Central Bank loosing control over the Central Bank loosing control over monetary policy (interest rates, exchange rates) monetary policy (interest rates, exchange rates) can’t control can’t control inflationinflation

EU accession EU accession opening EU labour market opening EU labour market outflow of labour outflow of labour force (e.g. to UK, Ireland) force (e.g. to UK, Ireland) Government has to rise salaries Government has to rise salaries and reduce taxes to motivate people stay in Latvia and reduce taxes to motivate people stay in Latvia can’t can’t control control inflationinflation

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II. II. Resume after 3rd year in EUResume after 3rd year in EU

Baltic tiger walking on the edge Baltic tiger walking on the edge Structural Structural changes in economy required to sustain the changes in economy required to sustain the growthgrowth

rising productivityrising productivityhigher value and less labour intensive added services higher value and less labour intensive added services

and production and production less capital intensive productionless capital intensive productionmore export oriented services and productionmore export oriented services and productionsmart use of EU funding smart use of EU funding

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III. III. Further perspectives – in the Further perspectives – in the search of new European identitysearch of new European identity Why new European identity needed for LatviaWhy new European identity needed for Latvia

setting medium term development targets for the setting medium term development targets for the nation – also requires searching for a new global / nation – also requires searching for a new global / regional (e.g. Europe, Baltic Sea Region) role regional (e.g. Europe, Baltic Sea Region) role

mobilizing and targeting scarce resources (human, mobilizing and targeting scarce resources (human, intellectual, financial) for action at international / EU intellectual, financial) for action at international / EU scalescale

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III. III. Further perspectives – in the Further perspectives – in the search of new European identitysearch of new European identity Possible identity scenarios - endogenousPossible identity scenarios - endogenous

from fast growing economy from fast growing economy to most competitive to most competitive economy economy standing for liberal values - free movement of standing for liberal values - free movement of

services, reducing tax burden services, reducing tax burden building knowledge based economy building knowledge based economy benefit from having 2 most competitive benefit from having 2 most competitive European European

economies at our door step - new identity for Baltic economies at our door step - new identity for Baltic Sea Region Sea Region

from periphery and buffer zone with Russia from periphery and buffer zone with Russia to the to the bridge with Russia and former Soviet Union bridge with Russia and former Soviet Union

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III. III. Further perspectives – in the Further perspectives – in the search of new European identitysearch of new European identity Possible identity scenariosPossible identity scenarios - endogenous- endogenous

from beneficiaries of extensive EU assistance from beneficiaries of extensive EU assistance to to effective manager of public financing in EU effective manager of public financing in EU

from a country dependent on supplies of fossil energy from a country dependent on supplies of fossil energy from Russia from Russia to front runner of sustainable energy to front runner of sustainable energy policy in Europepolicy in Europe

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ConclusionConclusion

Latvian accession to European Union Latvian accession to European Union proved to be success. However accession proved to be success. However accession itself does not grant to a country a status itself does not grant to a country a status of of a a successful member state. It’s now in successful member state. It’s now in the hands of Latvians to prove their ability the hands of Latvians to prove their ability

to become successful Europeans. to become successful Europeans.