EC Vice-President Valdis Dombrovskis calls on Latvia to "work on changing the economic model"

Latvia is among the first 12 European Union member states for which the EU has approved the right to a part of the Recovery Fund worth half a trillion euros.

The European Central Bank has issued and the EU administration has distributed a few trillion euros (a trillion is 1000 billion) in less than two years, on the grounds that the losses caused to countries and their citizens by Covid-19 must be compensated. The distribution of money from the European Recovery and Resilience Facility is now on the agenda.

The fund is established from an EU loan that is not distributed to EU member states and therefore does not increase the debt of Latvia or any other EU member state, at least on paper. The deadline for returning the money is set at 2058, which very many of today's Europeans will not live to see. Therefore, there is no need to think about returning money at the moment. However, this does not mean that money is given for free. Giving money is linked to such strict requirements that Latvia, if it had a choice to take or not to take it at all, would have reason to think twice about whether to enter into such requirements. These requirements were formulated in Latvian by the Vice-President of the European Commission Valdis Dombrovskis in his address to Latvia after the final approval of the Recovery Plan submitted by the Latvian government in all EU instances:

- There are two crucial issues. The first - to continue vaccination campaigns to strengthen public resilience to new waves of the virus. The second - to continue to support the economy for as long as necessary. At the EU level, we are already thinking about how to work on economic recovery by mobilizing significant financial resources for this purpose. The aim is not only to restore economic growth, but also to work on changing the economic model, i.e., working on green and digital transformation. In this context, both structural reforms and substantial investment will be needed. The aim of these reforms and investments is to make the economy competitive alongside the green and digital transformation process, for example by taking the lead in developing and implementing green and digital technologies and adapting the social market economy model to the challenges of the 21st century. At the same time as these aspects of green and digital transformation and economic competitiveness, it is also important to ensure that economic recovery is inclusive, thus ensuring the well-being of all, of society as a whole. So this is about investing in human capital, as well as supporting areas such as education, health and also the social sphere.

As can be seen here, the European Union, in the person of V. Dombrovskis, calls for a change in the economic model and declares the ultimate goal of this activity "the well-being of all, of society as a whole". Those interested can check and make sure that what V. Dombrovskis said here is written word for word, as he really said, because his speech is posted on the website of the Ministry of Finance. For many current residents of the Republic of Latvia, such a goal may remind of the definition of communism that was taught at school, that then "all sources of public wealth will flow in one mighty stream." The Soviet system did not get to communism, but under socialism, no one was allowed to question the fact that "the well-being of society as a whole" already existed. In this case, too, loyalty to the Latvian government that developed the Recovery Plan is incompatible with the question of whether prosperity in Latvia can really be achieved with 1.8 billion euros and - most importantly - whether it can be achieved by the measures which Latvian ministers undertook to solve the tasks set by V. Dombrovskis.

For example, it undertook to increase the amount and share of energy from renewable sources, which means nothing more than increasing the expenditure of the Latvian population in a section now called the mandatory procurement component (OIK). Of course, such payments can be called by any other name, but it will not change the fact that the expenses for the population of Latvia will increase and the standard of living will decrease.

It is also impossible to believe in improvements in the Latvian education system just because 26 thousand smart devices will be donated to Latvian schools for a total of 15 million euros. There will be no honeymoon in the relations between residents and municipalities just because the leaders of Latvian municipalities will drive electric cars for 10 million euros. The allocation of 30.7 million euros for the renovation of 20 primary schools of regional significance caused a stir. It is conceivable that this is a sufficient number of primary schools for the whole country, if the birth rate in Latvia will continue to decrease at the rate that Krišjānis Kariņš's government has now created.

A large part of the new fund money is directed to the old road of construction. Now, of course, construction work is not about building or repairing, but "increasing energy efficiency". However, regardless of the change of words, construction works are construction works and an increase in their volume at the expense of EU funding tends to increase construction costs.

Will the rise in prices not be even more pronounced now that the use of the previous Covid-19 money coincides with the start of the use of EU funding for the 2021-2027 period and the expansion of Rail Baltica's construction work? The Minister of Finance Jānis Reirs reassured that the spending of the Recovery Fund money would only fill the time until the start of the implementation of the projects of the new EU programming period and would not overlap with the spending of that money. However, he immediately acknowledged that construction costs were indeed going up for other reasons: "In one day, building material prices can rise by 40% across Europe and there is nothing we can do about it, it is determined by common trends in Europe and the world." Indeed, the rise in prices is driven by the printing of the euro, the US dollar and other major world currencies, without which there would be no Recovery Fund, as no one would lend EU money for as long and on as foggy terms as the Recovery Fund received money. Namely, the euro was printed for this purpose, the circulation of which threatens inflation and human poverty.

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