State visit may highlight labour-market row

Schmid won’t have much time to admire the Riga skyline Keystone

The federal president begins a state visit to Latvia on Monday – just months ahead of a nationwide vote on whether to further open the Swiss labour market.

Samuel Schmid’s two-day visit follows a trip to Switzerland in 2002 by his counterpart from the Baltic state, Vaira Vike-Freiberga.

Schmid, who is accompanied by a business delegation, will also meet Latvian Prime Minister Aigars Kalvitis for talks expected to concentrate on bilateral relations.

There is speculation that the talks could be overshadowed by the upcoming vote on whether to extend a labour market accord with the European Union to the ten new EU members – including Estonia, Lithuania and Latvia.

However, a Latvian foreign ministry spokesman said: “We hope the visit will help to intensify cooperation between the two countries.”

Referring to the consequences of a “yes” vote in September to the extension of the EU-Switzerland agreement on the free movement of people, he added: “There is no reason to think that Latvian workers are all going to converge on Switzerland.”

Before he leaves, Schmid – who is also defence minister – will hold a meeting with his ministerial counterpart, Einars Repse, to discuss security issues.

Extra money

Another subject almost certain to be discussed is Switzerland’s financial contribution to the EU social and economic cohesion fund.

The federal government recently promised to pay SFr1 billion (nearly $0.8 billion) over a five-year period, with a view to helping accelerate the financial and economic integration of the new EU member states.

But the question of where the money will finally go still has to be settled – Spain, Portugal and Greece have reportedly all lodged a claim.

Money from the EU funds is traditionally redistributed from richer to poorer regions, and the Mediterranean countries have been net beneficiaries to date.

However, a European Commission spokesman told swissinfo that the balance had changed completely with the admission of the ten new member states.

Imbalance

He said: “Productivity in all 15 EU countries [prior to enlargement], except for Portugal, exceeds that in all ten new member states [added together].”

Latvia comes bottom of the league table, with gross domestic product (GDP) per head less than half the overall EU average.

The country, which achieved independence from the Soviet Union in 1990, has a population of just 2.3 million, of whom roughly a third live in the capital, Riga.

Its low starting point notwithstanding, the Latvian economy is now one of the EU’s star pupils, with annual economic growth of between six and eight per cent in recent years – a rate the Swiss can only dream of.

A World Bank report in 2004 described the achievement as “impressive”, and added that Latvia “has reached the final stages of transition to a market economy”.

Fast track

It is also one of Switzerland’s fastest-growing trade partners – the level of commercial exchanges between the two countries has increased ten-fold since 1995.

Total Swiss exports to Latvia reached SFr123.4 million last year, compared with total imports of SFr11.7 million – giving the Swiss a substantial trade surplus of SFr111.7 million.

The main Swiss exports are pharmaceuticals (61 per cent of the total), followed by machinery (seven per cent), while the main imports are wood and cork (21 per cent) and chemical products (19 per cent).

About 40 per cent of Latvia is covered in forest – even more than in Switzerland.

swissinfo, Chris Lewis

Key facts

Latvian population: 2.3 million.
Capital city: Riga (764,300).
Language: Latvian (29.6% Russian).
Religion: Lutheran (55%).
Independence: 1918, 1990.
GDP per head (2003): €4216 (SFr6,495).
GDP growth: 7.5% per year.
Inflation (2003): 2.9%.
Unemployment (2003): c. 10%.
International: EU (since 2004), NATO, OSCE, Council of Europe.

In brief

Schmid arrives in Riga on Monday for a two-day state visit, accompanied by a business delegation.

He will meet top-level officials including the president, prime minister and defence minister, for talks about bilateral relations, international issues and trade.

Latvian President Vaira Vike-Freiberga visited Switzerland in 2002.