Latvia

III - Changes to Constitutional Law

Nature national instruments 
III.1
What is the character of the legal instruments adopted at national level to implement Euro-crisis law (constitutional amendment, organic laws, ordinary legislation, etc)?

In general, the legal instruments which had to be adopted to implement Euro-crisis law were adopted in the form of (amendments to) ordinary laws and at times in the form of Regulations of the Cabinet of Ministers. Constitutional amendments have been proposed but have not been adopted. At times institutions have changed their internal procedures to ensure successful accommodation of the Euro-crisis law (e.g. internal regulations of the Ministry of Finances were changed to ensure that certain draft laws and plans are coordinated with international lenders).

An interesting discussion in Latvia concerned the question whether the state should create a new form of binding normative acts – Regulations of Ministers. This question arose as well in the discussions with the international lenders when the question of how to make the legal system more efficient was considered. However, all the discussions on this question ceded once the Committee of Constitutional Rights issued its opinion on the Constitutionality of Possible Regulations of Ministers.[1] It essentially stated that in order to implement such new form of regulations, the Constitution would have to be amended and law amendments would not suffice. Also, such regulations would be connected with additional risks and their usefulness was doubtful. The Committee suggested paying more attention to improving the efficiency of the adoption processes of the Regulations of the Cabinet of Ministers.[2]

Constitutional amendment     
III.2     
Have there been any constitutional amendments in response to the Euro-crisis or related to Euro-crisis law? Or have any amendments been proposed?

No amendments in the Constitution have yet been adopted. However, there have been proposals for such amendments which have not been revoked, even though their advancement in the Parliament is doubtful. Please see Question IX.4.

Constitutional context  
III.3
If national constitutional law already contained relevant elements, such as a balanced budget rule or independent budgetary councils, before the crisis that are now part of Euro-crisis law, what is the background of these rules?

Not applicable.

Purpose constitutional amendment       
III.4
What is the purpose of the constitutional amendment and what is its position in the constitution?

Please see Question IX.4.

Relationship with EU law           
III.5
Is the constitutional amendment seen as changing the relationship between national and European constitutional law?

There have not been discussions in the context of constitutional amendments being seen as changing the relationship between national and European constitutional law.

Organic law   
III.6
Have there been changes to organic laws or other types of legislation that are of a different nature or level than ordinary legislation, in relation to Euro-crisis law or the budgetary process?

No.

Constitutional amendment and ordinary law       
III.7
If ordinary legislation was adopted in conjunction with a constitutional amendment, what is the relationship between the two?

Not applicable.

Perception source of legal change     
III.8
In the public and political discussions on the adoption of ordinary legislation, what was the perception on the appropriate legal framework? Was the ordinary legislation seen as implementing national constitutional law, or Euro-crisis law?

In the case of Latvia during the time when the country received financial assistance and in general, the debtor-lender relationship was very unequal.[3] This was mainly due to the fact that Latvia does not have a big economy with a significant market share on the global markets. In addition, the negotiations with international lenders were not public. This all gave the Government both reasons and the possibility to argue that all the changes introduced during the crisis were forced upon the country from ‘outside’.

On the other hand, changes to the budgetary process and budgetary laws often preceded the necessity to implement Euro-crisis law requirements. For example, the Law on Fiscal Discipline was approved in the Parliament’s first reading before similar requirements resulted from EU law (for example, before the Fiscal Compact was signed). Thus, these changes were and should be seen more as an internal reaction to the crisis, than as implementation of external – Euro-crisis –law. This was so as well partly due to the fact that the crisis in Latvia started comparatively early and ‘was over’ even before the newest measures were introduced at the European level.

Miscellaneous
III.9
What other information is relevant with regard to Latvia and to changes to national (constitutional) law?

Since Latvia joined the Eurozone on 1 January 2014, discussions before accession to Eurozone might be interesting. The Parliament on 1 January 2012 adopted the Law on the Order of Implementing the Euro. From the annotation of this law and the minutes of the Parliamentary session of 31 January 2013 it follows that the legislature by adopting this law has supported the Government’s objective to implement the euro starting from 1 January 2014.[4] In the second (and final) reading Prime Minister Valdis Dombrovskis emphasized the benefits the euro will give to Latvia in his opinion:

          Accession to the euro as a logical step was foreseen already in the Latvian accession Treaty. Latvia does not have an ‘opt-out’ concerning this question.

          Latvia fulfils all the Maastricht criteria and has joined the Exchange Rate Mechanism II already in 2005 by pegging Lats (LVL) to euro (EUR) and determining a narrow floating possibility (+/-1%). However there were problems with the Maastricht criteria and Latvia had to postpone joining the euro twice.

          Since 2004 joining the euro has been one of the aims mentioned in all Government declarations.

          The irresponsible macroeconomic policy has cost us dearly and in 2008-2010 Latvia lived through the worst economic crisis in the whole EU. The implementation of the euro was determined as one of the objectives of the strategy for overcoming crisis with support inter alia from the social partners – trade unions and the Employers’ Confederation of Latvia. The Euro is the next logical step in exercising our macroeconomic policy. Already at the moment we in fact are importing the monetary policy of the Eurozone without being in it and without participating in the decision-making and with paying the exchange rates.

          The introduction of the Euro will achieve lower interest rates, more rapid inflow of investments, increase in export, reduction of costs of currency exchange and better resilience to economic shocks.

          The ECB in the case of necessity ensures liquidity for Eurozone banks. In 2008 Latvia was forced to ensure Parex Bank with liquidity from budgetary means. If the euro would have already been implemented, the ECB would have ensured Parex liquidity and the crisis would have been less harsh for Latvia.

          The main argument against the euro which has been mentioned is the renouncement of independent monetary policy. It is true that after joining the euro the monetary policy will be determined by the ECB. However already now the LVL is pegged to the euro and in fact Latvia is importing the monetary policy of the Eurozone. After joining the euro, essentially nothing will change in this matter. If we would like to have total monetary independence we would need to unpeg the LVL from the euro. In such case it is sure that the LVL would lose its value. In other terms independent monetary policy means de facto devaluation of the LVL which would come together with inflation and high interest rates.

          Concerning the possible collapse of the Eurozone he emphasized that the EU has done much to deal with the causes of the crisis and to overcome it. Many initiatives have been adopted in order to strengthen the EU economic governance and the EFSF and ESM were created. In general the Eurozone will come out of this crisis stronger and with better governance than ever before.

          The prices in the countries that have recently joined the euro have increased insignificantly.

          Joining the euro has as well a geopolitical aspect. By joining we strengthen our affiliation to the family of leading West-European countries. Followingly, also our role in the EU and in the world will grow.[5]

 

On 5 June 2013 the ECB and the European Commission confirmed and accepted Latvia joining the Eurozone in 2014.[6] And since 1 January 2014 Latvia belongs to the Eurozone.

[1] Committee of Constitutional Rights, ‘Viedoklis par iespējamo ministra noteikumu satversmību’, 31 May 2011. Available under: http://www.president.lv/images/modules/items/KTKT_viedoklis_01_06_11.pdf (last visited 25 June 2013)

[2] Ibid, p. 22-23.

[3] Samuel Dahan, ‘The EU/IMF Financial Stabilisation Process in Latvia and Its Implications for Labour Law and Social Policy’, ILJ 41(3), pp. 305-327, p. 308.

[4] Annex XIX Informatīvais ziņojums Finanšu ministrija 010313, p. 1.

[5] LR Ministru kabinets, ‘Ministru prezidenta Valda Dombrovska runa pirms Saeimas balsojuma par eiro ieviešanas likumprojektu’, http://www.mk.gov.lv/mp/runas-pazinojumi/dombrovska-runas/310113-MP-runa/?print (last visited 23 June 2013).

[6] DELFI, Vēsturisks lēmums: EK un Eiropas Centrālā banka Latvijai ver durvis uz eiro ieviešanu, 5 June 2013. Available under:  http://www.delfi.lv/bizness/biznesa_vide/vesturisks-lemums-ek-un-eiropas-centrala-banka-latvijai-ver-durvis-uz-eiro-ieviesanu-plkst-1444.d?id=43377243 (last visited 23 June 2013).