Ventspils mayor Aivars Lembergs answers Neatkarīgā's questions.
Currently, the Saeima is preparing changes in the distribution of personal income tax. If the changes are adopted, next year the municipal budgets will lose more than 90 million euros, which will be redistributed in favor of the state budget. In fact, this means that municipalities will have to reduce something - funding for schools, investment in infrastructure maintained by municipalities, and so on. How could these changes affect Ventspils?
The redistribution of personal income tax is intended to be very radical. In total, the municipality will lose about one hundred million euros. There has never been such a large reduction as now, including during the 2008-2009 crisis. Currently, the state offers to reduce the social tax by 1%. That about creates a hundred million.
At one time, the Kučinskis government increased the social tax by 1% because they said that the increase would be directed to the health budget. These are such strange actions that there is no logical explanation. And the government is well aware that personal income tax accounts for about 85% of all municipal tax revenue.
In my opinion, they take money away from all the municipalities, so that the municipalities that will be closer to them can then be given a financial supplement through various channels. They will support those who are with them. The goal is for them to be able to win the next Saeima elections in these municipalities.
One example. Kariņš has announced that Riga will receive 900 million as such a gift. Riga's budget will lose about 40 million euros from the reduction of the personal income tax proportion. For them, this reduction of 40 million will be offset by 900 million. So far, no one has so generously blessed any other municipality.
As for Ventspils, in 2021 our tax revenues will decrease by approximately two million euros compared to this year. In addition, there will be a mandatory increase in expenditure. It is necessary to increase the salaries of kindergarten teachers, social assistance will increase. Expenditures for Ventspils will increase by an additional 500,000, which is not including inflation. The hole in the 2021 budget is two and a half million against this year. Of course, this will limit investment and procurement, it will be the first way to compensate.
This year, employment rates have deteriorated throughout the country and also in Ventspils. If on September 30, 2019 the registered unemployment rate in Ventspils was 3.9%, then on September 30 of this year - already 6.1%. The number of unemployed registered in Ventspils increased by more than 50% compared to last year. How does Ventspils feel the consequences of the increase in the unemployment rate, and what tools does the municipality have at its disposal to mitigate these consequences?
First of all, the local government already feels the direct consequences as lower personal income tax revenues. The big advantage of Ventspils is that we have 15 million euros of free funds in our account. So we have some safety buffer. After the Saeima elections, I drew the attention of my colleagues to the fact that all kinds of peculiarities should be expected from this government, and we also received them. That is why we created the Ventspils budget very cautiously last year. However, I would not link this year's rise in unemployment in Ventspils to Covid-19 alone. The increase in unemployment was caused by American sanctions against the state-owned Freeport of Ventspils, which were imposed at the request of the Latvian government. At the request of the Latvian government, the Americans introduced economic sanctions, and this was exactly what caused the negative processes in Ventspils' economy and Latvia's transit business in general. Some kind of SJSC Ventas Osta was created, which has never existed in life. Commercial banks refused not only to lend, but also to extend loans to Freeport of Ventspils Authority.
The consequences will be felt for a long time. The fact that one NATO country imposes sanctions on a port belonging to another NATO country is, of course, a unique case in the history of civilization, it has never been the case. Imagine Trump asking Putin to impose economic sanctions on the New York port! What happened was something similar.
In answer to the question about employment risks, we have been counting since 2000 on the fact that such a large share of the transit sector in the city's economy is politically sensitive and dangerous. Therefore, we are implementing an industrialization policy, as a result of which the share of employees in the manufacturing industry has increased several times and will soon exceed the share of employees in the transport sector. New industrial buildings are needed to develop this approach. While Ventspils municipality was represented on the board of the Freeport of Ventspils, we participated in the tender of the Central Finance and Contracting Agency for funding in the amount of one and a half million euros for the construction of a new industrial building.
Unfortunately, when Ventspils municipality was expelled from the board of the Freeport of Ventspils, the new state board refused to finance one and a half million euros and thus also refused to build a new industrial building, which would give Ventspils a basis for a new production plant. It would create about 70 new jobs directly in the industrial building, but in total would create about 200-250 new jobs. Of course, this is holding back development. So far, the new industrial territories have been established in the territory of the Freeport, but the current members of the board - Rigans - don’t care a whit about the development of some Ventspils industry. Now we are ready to offer investors to invest in the development of factories that do not have a direct need to be in the Freeport of Ventspils administration territories, so that they are independent of the narrow-minded decisions of the management of the new Freeport.
This year in Latvia the hospitality sector is going through hard times, as well as the entertainment and culture sector. How are they in Ventspils?
In Ventspils, the field of culture is significantly related to the municipal economy, so in Ventspils people received a salary, maybe there were some problems for those who worked on contracts, but they also did not have big troubles. As for the hospitality industry, the figures were the same as in the whole of Latvia. These are usually small businesses, so the overall impact on it is relatively small, but it is painful for a particular family, so it is important.
The most important sectors for Ventspils are transport, transit and manufacturing.
If the US economic sanctions against the state-owned Freeport of Ventspils were not imposed, which was done at the request of the Latvian government, then, I think, the situation would have a minimal negative impact on us.
The way in which the US government introduced sanctions against the Latvian state port at the request of the Latvian government is the main cause of the employment problems in Ventspils in 2020. In addition, there has been enormous indirect damage. Sanctions sent a very negative signal to investors. They had always relied on predictability, stability, keeping promises and the like, which is now, so to speak, thrown to the wind. In my opinion, the Latvian government was not even aware of the consequences of its actions, but the Americans were not informed at all about who owns the Freeport of Ventspils. It is clear that one has to be a complete idiot in order to drag our strategic partners, the Americans, into such abomination.
In a short time, the government destroyed the ten-year-old port management model taken over from Western Europe, Rotterdam, to replace it with the completely new Ventas Osta. Such a thing as Ventas Osta has never existed. The Freeport of Ventspils is a brand. It is the same as changing the name Coca-Cola to Mopsicola. Of course, Coca-Cola would never ever do that. This points both to the absolute incompetence of the government and, at the same time, to narrow-mindedness or possibly some deliberate undermining. Depriving a port of its brand is a huge, huge, huge crime.
Kristovskis and Strautmane now determine everything in the Freeport of Ventspils Board. Kristovskis represents the New Unity party (Jaunā Vienotība), but Strautmane represents the New Conservative Party (Jaunā konservatīvā partija). As a result, the drop in cargo turnover at Ventspils port this year is 42%. However, in Klaipeda at the same time the drop in cargo is only 1%, in Riga - 26%, but in Liepāja - 14%, in Latvijas Dzelzceļš railway company by 46%. Since Bordāns and Linkaitis have taken over the management of the transport and transit industry, the consequences of their actions have been simply devastating.
Unfortunately, these people are turning not only against the Latvian economy and the transport sector, but also against the preservation of Latvia's cultural and historical heritage. In Ventspils, on Krišjāņa Valdemāra Street 12, there are workshops that have survived from the time of the Russian Empire, where metalworking machine tools that are 60 and more years old are still in good condition. According to historical experts, this is a unique national, industrial heritage of Latvia's cultural history. Now the Freeport of Ventspils Board, led by Kristovskis, has decided to sell this equipment on the condition that it be removed from the historic building within a month. If these facilities are sold by removing them from a historic building, then the unique cultural heritage is destroyed. The uniqueness of the workshops is in the combination of equipment and buildings. The National Cultural Heritage Board and the Ventspils Museum oppose such a decision.
On October 23, a meeting of Ventspils City Council was held, and Ventspils City Council categorically condemned the following decision of the Freeport of Ventspils Board - to destroy an important part of Latvia's national cultural heritage. Ventspils City Council demanded that Prime Minister Krišjānis Kariņš, who has approved four members of the Freeport of Ventspils Board headed by Kristovskis, and also four ministers who have delegated their representatives to the Freeport of Ventspils Board, stop the implementation of this crime. The current Freeport of Ventspils Board cares absolutely nothing and nothing is sacred. In my opinion, their goal is to destroy not only the port of Ventspils as a transport hub, but also to destroy the cultural and historical heritage of Ventspils. In my opinion, this is a mind-boggling, simply criminal activity. We can only protest because we have no other rights. The building in question is in the territory of the Freeport Authority and is not needed by the Freeport Authority. Meanwhile, the building of the Freeport of Ventspils Authority Office belongs to the local government, but the Freeport Authority Office is located there. We offered the Freeport Authority to replace the two historic workshop buildings with the building where the Freeport Authority's office is located. The deal was agreed, but then the members of the board of the Freeport Authority - the people of Riga - suddenly refused and decided to destroy the equipment.
How would you assess the Latvian government's actions during the Covid crisis in general? Different countries had different approaches. For example, Sweden imposed minimum restrictions in general.
It is now clear that the measures imposed in the spring were unreasonably draconian. Currently, the situation is much, much worse. Incomparably worse than in the spring. In addition, with greater unpredictability than in March, April or May. Many measures were inadequate, and now it is more than clear. But it has to be admitted that everyone was facing a completely unknown situation at the time.
How would you assess the planned use of funds to stabilize the crisis?
It looks like in Air Baltic will eventually receive a billion to subsidize only those who fly. Then the question has to be asked, why the hell?
Huge money is given to Air Baltic, huge money is given to Latvijas Dzelzceļš and state-owned companies that are poorly and irrationally managed. That's where most of Covid money goes.
Maybe such large sums of money should not be spent at all and public debt should not be increased?
Compare the two crises, the 2009 and the 2020 crises. Compare the actions of the Latvian government then and now. It is diametrically opposed. In 2009, the government decided to cut everything and raise taxes. That’s what happened. Now the opposite is true, and the question is, why? At that time, consultants from the World Bank, the International Monetary Fund, the European Commission came and said that we need to tighten our belts and raise taxes, that we can not spend so much. That was exactly the recommendation. Vilks, together with Dombrovskis, gave a salute and did everything exactly, including reducing the pensions for the pensioners. Now it is the other way around! Now there is extra money to help entrepreneurs, workers. At that time, the New Era Party (Jaunais laiks) was in power, and now they are in power again, but the opposite is true.
Maybe over these 10 years, Vilks and Dombrovskis have become wiser and understood mistakes?
No! They didn't understand anything. When the European Commission, the Monetary Fund and the World Bank said: “Tighten your belts! Reduce salaries, benefits and pensions! Increase taxes!” - then they did it. Rudimentally fulfilled. Ordered to raise taxes? They, like good little students, executed the order accurately.
But now the European Union is saying, “What are you saying! There is no need to raise taxes. Warm up the economy!” Now a different order is given. This is because there is now a crisis in old Europe as well. There is now a crisis in Germany, France, Italy, Spain and elsewhere, but they are not using the recipe they used against us in 2009. That is why they are now telling us that such a recipe should not be used. It were ordered to tighten the belts, the current Latvian government would do it, but there is a different order.
On the other hand, there is no direct order from Berlin or the European Commission on creative intelligence. Unfortunately, it looks pathetic. The Latvian government operates without its own brain. Now most want to take from those who have significantly lower incomes as a result of the Covid crisis. Despite the crisis, they want to take from those self-employed people who have just partially lost their income. Now they are doing to the self-employed exactly what they did to the entire Latvian nation in the 2008 and 2009 crisis.
But I want to end my interview in a different way. Since some people who pretend to be investigative journalists, such as Re:Baltica, call everyone who criticizes the current Latvian government distributors of fake news, I would like to announce that Latvia is run by the world's smartest, most talented and most educated professional ruling coalition with Krišjānis Kariņš at the forefront!