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Did Latvia benefit from EU integration?

July 07, 2014, 18:03 UTC+3 Alexandrova Lyudmila
© EPA/GEORG HOCHMUTH

MOSCOW, July 07. /ITAR-TASS/. Last month Ukraine, Moldova and Georgia signed association agreements with the European Union. The question of whether the post-Soviet republics would win or lose from European integration has recently become an issue of heated debates in Russia. The Baltic countries, in particular Latvia, that has the largest percentage of the Russian-speaking population, provide a vivid example of what the three countries can expect. Experts do not doubt that disadvantages will outweigh the benefits.

In May of 2014, Latvia and some other Eastern European countries celebrated the 10th anniversary of the accession to the EU and NATO. Ten years ago, Latvia, Lithuania and Estonia dreamt of catching up with Finland’s living standards and salaries but the dreams remained unfulfilled both economically and socially, and the Baltics now lag behind other EU countries.

To make matters worse, Latvia joined the eurozone on January 1, 2014. The Latvian president Andris Bērziņš recently said he saw no disadvantages in the decision, “The Latvian economy is developing according to the plan, which is in particular enabled by euro introduction, as the country  became more appealing for investors."

Meanwhile, some media on Monday reported the data by the Agricultural Market Promotion Center, showing a rise of food prices after Latvia had joined the eurozone. This mostly affected fruit and vegetables, with prices increased between 30 and 90%. “Over six months since Latvia’s accession to the eurozone, food basket added 20% in price, and this is official data,” the Latvian political scientist Einārs Graudiņš told NewsBalt. Moreover, when the so-called open electricity market opens on EU demand, electricity tariff will rise by at least 25%, the expert predicts.

During our recent vacation in Italy, in the city of Bari, we were accompanied by a 30-year-old guide, a Riga-born Russian, Valery. Eleven years ago, he left his mother in Latvia and headed for Western Europe seeking a better life. All this time, Valery has done everything to make ends meet: in summer, he is a guide in Italy, while in autumn and winter, the low season, he goes to Germany to work as a driver. He does not dream of having his own house, but he would never consider going back to Latvia.

“Before the 2008 crisis, it seemed there was hope but the real bad luck streak followed. The people piled up loans but had nothing to pay them back. Banks took their apartments away from them,” he said.

Bari welcomed many Ukrainians at the time of agricultural works, Valery said, “They happily greeted the EU association - these strange people do not understand what consequences this can entail. Latvia, for instance, has lost practically all its sugar plants.”

Indeed, in the years of EU membership, the Baltics have really lost most of their economic potential. Most production facilities have been closed or reoriented as the EU deemed them uncompetitive. Along with sugar production, Latvia got its fishing and fish processing, textile and footwear production, as well as electronics, damaged.

“The entire local business has been eliminated or resold to Western owners,” said Graudiņš. “The local bureaucracy - officials, civil servants and municipal workers - is the only group of society that lives an easy life and they by all means hailed Latvia’s accession to the eurozone. These are mainly those who are using European funds.”

“All Latvian banks and lands have been mostly bought up by Scandinavian banks,” President of the Amber Bridge fund Yury Sizov told ITAR-TASS.

EU integration promised Latvia more disadvantages than benefits, the expert believes. Euro-optimists can only boast tranches they receive from European budget funds to construct roads in Latvia. However, the roads mostly stood idle, Sizov said.

The worst asset of today's Latvia is the appalling emigration, experts say. For the first time in the country's post-war history, its population stands at less than two million against almost three million in 1990-91.

“For various reasons, about 400,000 Latvians have left the country over ten years, mostly young people and qualified specialists. However, their employment in Europe is far from skilled work - they harvest strawberry or work as nurses,” Sizov said.

Like other Baltic countries, Latvia has almost made a U-turn towards transit and services, in particular tourism, but this does not provide incomes comparable to that in wealthy European countries. The government was forced to cut social spending, reduce wages in the public sector and hike taxes. As a result, Estonia and Latvia now have the lowest social spending in the EU.

“Latvia is one of the few countries in the world where pensioners pay taxes on their pensions,” Sizov said.

“It is not normal when in a family of four, husband and wife work but the family income is falling year after year, while spending is increasing,” Graudi·· said. “God forbid that you should fall ill - you will then be ill and poor. Because the entire healthcare is to be paid for.

 

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