The year 2012 in Latvia has been characterised by two opposed and seemingly disconnected tendencies – on the one hand, despite all stories of economic gloom, poverty and emigration, the Latvian economy sits as the most positive in Europe, with growth of over 5% per annum, which is likely to continue well into the future.

On the other hand, we have had a year of bitter social division, continuing aggressive attacks on the government and the state, and a string of political or administrative disasters.

In many ways the political environment in 2012 has become even more toxic and fragmented than in previous years. The signal event here was the referendum on Russian as a second official language on February 18, which despite its failure has been followed by threats of another referendum to give citizenship to all residents, and a relentless campaign to increase the influence of the Russian language, and Russian values more generally, into the Latvian polity.

However, almost equally debilitating has been a series of political stalemates on critical issues affecting the society and democratic institutions. In the aftermath of the referendum, a desire to reform the referendum process (which had made it too easy to bring controversial issues to a referendum) has itself wallowed in political differences, with even coalition partners for a long time disagreeing on what should be the new norms of conducting referenda.

Meanwhile, the attempt to bring about another referendum on granting citizenship to all permanent residents in Latvia was able to gather the required 10,000 signatures to force the Central Electoral Commission to move to the next stage of wider signature gathering, but after gathering constitutional advice from all sides the Commission has decided not to take this next step. Bitterly criticised by the advocates of the referendum, this issue is likely to end up in a long drawn-out legal process, no doubt all the way up to European courts.

Proponents of the two referenda have not been idle on other fronts. The obnoxious Vladimir Linderman, a non-citizen himself but chief protagonist for the language referendum and now leader of the nascent National-Bolshevik oriented Native Tongue Party (Dzimtā valoda), continues to preach separatism and Russian dominance, focusing now on demanding greater ‘autonomy’ for the Eastern province of Latgale, the heavily russified area where a majority voted yes to having Russian as an official language. His open attacks on the Latvian state continue, and in the future we will no doubt witness a further fight: he has applied for Latvian citizenship, a move that perhaps will also end up in the courts.

Yet referenda and national issues are not the only ones of political import. The government has also been bogged down in issues that should otherwise not be highly politically controversial. The desire to reform Latvia’s poorly organised higher education system (with multiple institutions teaching similar courses) has led to a long-drawn out stalemate, with months of argument confusing the society, raising claims of corruption, and leaving potential students perplexed. A review was made of no less than 53 higher learning institutions (of which 19 are universities) – an extraordinary number for such a small country as Latvia – finding many overlapping and poorly performing courses, but this assessment project has itself been accused of being corrupted. Education Minister Roberts Ķīlis wants to sensibly rationalise this system, but he has also raised ire with a few of his side suggestions – such as having all teaching in universities in English or another EU language, bringing fierce rebukes from many in his own coalition. 

And in another stellar performance, a public-private deal to mount speed radar detection equipment on Latvia’s roads also ended in farce as the private company was unable to roll out the equipment, which sometimes was also faulty where it was installed; the basis of the deal – that profits for the company and tax revenues for the government would be greater the more infringements were detected – led to this downward spiral.

These incidents attest not only to political ineptitude but even more so to administrative and organisational weaknesses that increasingly worry Latvian citizenry: that any useful policy will be mired in corruption and/or administrative incompetence. For all his economic acumen, to which we return below, Prime Minister Valdis Dombrovskis, with his reticent character and technocratic persona does not seem able to sustain reform where needed – plans come out talking about combatting the shadow economy (estimated at being up to one-third of the overall economy), or combatting tax evasion, or bringing transparency to contract or administrative proposals, but they often seem not to be realised.

Former Foreign Minister and European Parliament deputy Georgs Andrejevs, reflecting on this, claimed many useful political initiatives were constantly ‘torpedoed’ by a resisting bureaucracy. On this same theme, 2012 also marks the end of an era for Latvia’s Chief Auditor, Inguna Sudraba, who in the past 8 years has uncovered often stupendous corruption and shortcomings in state institutions, but many of her recommendations have not been pursued by government, and only a few of the corrupt parties have been brought to account. Sudraba, whose statutory term now ends, has been urged by many to form her own party and enter politics.

And finally on the political front: for those Latvians watching their country from the outside, 2012 brought some rude shocks, this time from President Andris Bērziņš. In September he reflected on the end of the term for another outstanding civil servant, Jānis Kažociņš, head of Latvia’s main security apparatus, the Constitution Defence Bureau [Satversmes aizsarzības birojs – SAB]. Bērziņš said that the next candidate for this position should be a ‘Latvian from Latvia’; Kažociņš grew up in the UK where he was engaged in security agencies there as well, and this assertion by Bērziņš was denounced by another ‘overseas’ Latvian, ex-President Vaira Vīķe-Freiberga as discriminatory. To endear himself even more to overseas Latvians, Bērziņš’ National Independence Day speech for them on November 18 was drab, hesitant, unconvincing, with worrying signs of early dementia as much as incompetence.

And yet in the midst of this, Latvia’s economy continues to recover and grow. GDP grew by an impressive 5.6% in 2012, continuing the 2011 performance, with estimates of again greater than 5% growth in 2013. Latvian exporters have developed new markets, both within and beyond the EU, and there are the first hints that consumer confidence is returning to a still largely economically battered population. And visitors to Riga in particular will have noticed new enterprises and economic enthusiasm.

There is no great prospect of seeing any early return of the estimated 200,000 people who have left Latvia to look for better economic prospects elsewhere, but this continuing growth is becoming significant in an otherwise economically becalmed – or worse – Europe. Dombrovskis has worked very hard to bring about this situation and avert the fate of several Mediterranean EU members, but unless he can bring the same degree of control and leadership to the many political troubles still apparent in Latvia, the economic promise will appear to be little felt and little appreciated by an ever more divided Latvian society.