MEP Roberts Zīle: Ministers sat quietly, thinking it would help them get more money from MoF

In a conversation with Neatkarīgā, Roberts Zīle, Member of the European Parliament and Chairman of the National Alliance (Latvian: Nacionālā Apvienība, NA), explains some aspects of Latvia's state budget for 2021.

You have repeatedly said on various platforms that our Ministry of Finance (MoF) is trying to win in a competition where others are running in the opposite direction. Namely, if other EU countries are thinking about how to stimulate growth and not lag behind, then our MoF is thinking about how to spend less, how to save more, and thinking about stimulating the domestic economy is put in the last place. Why such a peculiar approach?

I have met and discussed this issue several times with the Minister of Finance, ministry officials and also with the Prime Minister. I have been talking to them since the summer, when this budget started, about the budget framework and the size of the deficit, both individually and in the meetings of the cooperation council together with other members of the coalition. In these negotiations, calling for a budget deficit of 4% of GDP, I remained in the minority. The deficit is now set at 3.9% and is likely to remain so. At the beginning, when we submitted this 4% bar, the MoF told us that it would be the fourth largest deficit in the EU. It is not true. We have the third smallest deficit in the eurozone among 19 countries. Behind Luxembourg and Cyprus, which are very specific cases. This shows that such a stingy policy was in place from the very beginning. At a time when there is no longer a 3% deficit limit and a 60% cumulative government debt limit; when other countries take the opportunity to stimulate their economic growth and keep up, we save when others spend. We are in the same eurozone with one money, and we are only doing ourselves a disservice with our austerity. We create insecurity for our people. Many are now left without any income at all. We have discussions in individual health care positions about reimbursable medicines for 500 000 euros, for a million euros, which is simply ridiculous against the total money available. In the Recovery Fund, without grants [non-refundable financial support], we already have EUR 2 billion available, which we can borrow with long and cheap money, which would further strengthen our health care. I’m not accusing the MoF officials on lack of professionalism. Their professional experience was shaped by overcoming the crisis ten years ago, when the situation was radically different. However, we can see how Germany supports its economy so that German business does not lose ground. They even reduced the VAT rate, which led to deflation only so that people would spend money and have more domestic consumption. Our government is taking a completely different path.

You said that you were in the minority, but Gatis Eglītis, the New Conservative Party’s (Latvian: Jaunā konservatīvā partija, JKP) representative for financial policy, is also not from the 'stingy' class.

Yes, we already published a joint memorandum in the summer, which was also signed by the JKP. We wrote it together with Eglītis so that at least some cash flows could be launched and the prepared projects would start to move forward. Unfortunately, in broad terms, the budget framework has remained very cautious, which is wrong in these circumstances.

It is weird that NA and JKP are about broader economic stimulus; Development/For! (Latvian: Attīstībai/Par!, A/P) last year called for an additional 60 million euros to be allocated to health care at the expense of the budget deficit, which shows that this deficit is not a stone-cut dogma for them either. So it turns out that Unity (Latvian: Vienotība) with its eight votes holds the whole coalition in its hands?

At that time [a year ago] the situation was a little different. At that time, the European Commission's monitoring criteria were in place and had to be met.

It's clear about last year, but we're talking about the new budget for next year. Who are the political forces holding back wider economic stimulus?

The coalition is the same, and it is very difficult to balance the interests of all parties. No one wants to fall out of government, in my view. Therefore, the Minister of Finance and the Prime Minister can balance as they wish. Consequently, the Minister of Finance has a major role to play. Each of the ministers wants to receive something in their budget, and that is their main goal. If it is balanced, then everyone - the ministries and the parties that make up the coalition - is more or less good. On the other hand, the budget framework for the country as a whole is too small, which does not allow us to win a good place for growth when the crisis ends. Then the one who emerges first will be in the best position.

It seems that the influence of the Ministry of Finance and Unity on the public finance with their eight votes is disproportionately large.

What does disproportionately large mean? Well, it is, but that was the composition, because this election result was so bad that it was difficult to put something else there.

That is clear, but I’ll repeat the question - NA and JKP are in favor of greater use of financial instruments, also Ilze Viņķele, Minister of Health from A/P, would hardly be against wider health financing. So who is against?

There the story is different. No one joined our two-party memorandum. If any of the coalition parties had a desire to do so, we would gladly accept it, but there was no such desire. When the budget began to be "stacked" together, each ministry began to look for an increase in its budget that would be good for them. They did not have a priority interest in the total budget deficit, leaving it to the competence of the Ministry of Finance. Whatever MoF predicts, that is what we do. They were told that the European Commission would be angry if we put something in the budget that would be in the base expenditure in the future. So everyone was about one-off measures - to build something, to do something that has to be paid for only now, but that is not enough. For example, as I say to colleagues, we can build a new 'green' and 'digital' modern hospital, but if we do not allow for a significant increase in salaries for doctors, then this hospital will be useless, because there will be no people working in it. People leave for those Western European countries where they get paid much more in their professions. Therefore, this is not a solution - trying to create hope for people to prosper only with individual projects.

I must have imagined that A/P has a more open perspective.

Yes, they did not raise their voices when it came to the budget framework. I also thought that there would be a longer debate in the coalition on this framework. I took part in these talks, and the framework offered to us by the MoF seemed too low. We tried to pull it up, but no one really supported us. The others sat quietly, thinking it would help them get more money from MoF in their industry. That probably was the case. This is the result.