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

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

• Andzs Ubelis
• MSC Eco. student Cardiff University
• Deputy State Secretary, Ministry of Finance,
  Republic of Latvia
• EPRC
• Glasgow, 20 March, 2007

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Content of Presentation

• Past - EU accession success story
• Present - Resume after 3rd year in EU
• Future in the search of new European identity

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I. EU accession success story

• 9 years of reforms (1995-2004)
• economic transition (Free Trade Agreement with
  EU, Russian crises 1998) and shifting trade from
  East to West
• market liberalisation
• harmonisation of the legislation
• building institutions and improving governance

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I. EU accession success story

• Accession process
• proving commitment for reforms
• getting on a fast track escaping from the group
  of 2007 enlargement (1999 Helsinki)

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II. Resume after 3rd year in EU

• Status of a new member state
• newcomers in an old club EU15 vs EU10 (EU12)
• EU6 vs Cohesion countries
• Donors vs Beneficiaries
• Liberal economies vs Social Model

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II. Resume after 3rd year in EU

• Costs and Benefits
• good financial package for 2007-2013
• little success with EU agenda (constitution,
  legislation on free movement of services)
• limited influence at European scale
• only one clearly visible political leader from
  Latvia on European / International scene
• poor representation in EU institutions
• joining Euro zone becomes a challenge

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II. Resume after 3rd year in EU

• Baltic tiger walking on the edge
• high real GDP growth rates (10 and more)
• inflow of FDI and capital
• high inflation
• current account deficit
• indebtedness
• risk of overheating
• risk of devaluation of national currency and
  financial crisis

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II. Resume after 3rd year in EU

• Baltic tiger walking on the edge ? Macroeconomic
  policy trap for the Government and the Central
  Bank
• EU accession ? economic growth ? higher demand
  for labour ? higher wages ? higher prices ?
  inflation
• EU accession ? agenda for joining Euro zone ?
  pegging Latvian Lat to Euro ? the Central Bank
  loosing control over monetary policy (interest
  rates, exchange rates) ? cant control inflation
• EU accession ? opening EU labour market ? outflow
  of labour force (e.g. to UK, Ireland) ?
  Government has to rise salaries and reduce taxes
  to motivate people stay in Latvia ? cant control
  inflation

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II. Resume after 3rd year in EU

• Baltic tiger walking on the edge ? Structural
  changes in economy required to sustain the growth
  
• rising productivity
• higher value and less labour intensive added
  services and production
• less capital intensive production
• more export oriented services and production
• smart use of EU funding

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III. Further perspectives in the search of new
European identity

• Why new European identity needed for Latvia
• setting medium term development targets for the
  nation also requires searching for a new global
  / regional (e.g. Europe, Baltic Sea Region) role
• mobilizing and targeting scarce resources (human,
  intellectual, financial) for action at
  international / EU scale

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III. Further perspectives in the search of new
European identity

• Possible identity scenarios - endogenous
• from fast growing economy ? to most competitive
  economy
• standing for liberal values - free movement of
  services, reducing tax burden
• building knowledge based economy
• benefit from having 2 most competitive European
  economies at our door step - new identity for
  Baltic Sea Region
• from periphery and buffer zone with Russia ?to
  the bridge with Russia and former Soviet Union

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III. Further perspectives in the search of new
European identity

• Possible identity scenarios - endogenous
• from beneficiaries of extensive EU assistance ?
  to effective manager of public financing in EU
• from a country dependent on supplies of fossil
  energy from Russia ? to front runner of
  sustainable energy policy in Europe

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Conclusion

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