Report on the situation in Latvia after accession and on the situation of the Latvian
electrotechnical sector from the point of view of workers
It is cause for satisfaction that the European Economic and Social Committee (EESC) and the
Consultative Commission on Industrial Change (CCMI) should have organised a public hearing, since
the EU institutions are far off, processes are not always understandable and all decisions do not affect
all regions equally.
I represent the Free Trade Union Confederation of Latvia (LBAS), the only organisation to defend the
rights and interests of workers in Latvia. Our organisation includes approximately 20% of all workers.
We represent 21 independent sectoral trade unions.
In addition to being a member of the Free Trade Union Confederation of Latvia, I head the Latvian
trade union "Energy", which brings together some 5 000 members of the sector for energy, heat
generation, etc.
Latvian trade unions have worked actively to ensure that Latvia regains its independence, is admitted
to NATO and is able to participate in the EU on an equal footing.
The new context, characterised by global, radical changes, is a key factor in changing trade unions'
priorities. From local actions and a simplified concept of their role, trade unions must direct their
activities towards the influence of global processes to reduce the negative impact on workers. This is
why the Free Trade Union Confederation of Latvia and the trade unions of various sectors are making
an active contribution to international efforts.
The trade union "Energy" belongs to the following organisations:
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Public Services International (ISP);
European Mine, Chemical and Energy Workers Federation (EMCEF);
European Federation of Public Service Unions (FSESP).
Of course, we also cooperate with our neighbours from Lithuania, Estonia, Ukraine, Denmark, etc.
Despite 19 years' experience of the market economy in the context of globalisation and five years'
experience in the EU, LBAS faces several major problems:
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weaker social dialogue at national and sectoral level;
the Saeima and the government are opposed to active social movements in Latvia, and have
thrown themselves into reducing the unions' influence (they change labour law to the detriment of
workers and put up other obstacles);
employers from the various sectors do not form strong employers' organisations and so there is no
way to conclude general agreements with them.
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-2After joining the EU, the impact of globalisation on the development of the Latvian economy has
been particularly perceptible and not always positive. Local labour has begun to migrate towards
western countries owing to low wages. Unfortunately, highly qualified people hold posts there which
do not require any qualifications, a loss for the EU as a whole. Another problem is the influx of
migrant workers from the EU and third countries towards Latvia; regrettably, these are unqualified
workers which leads to social dumping, with social integration impossible.
The trade union has identified the risks now accompanying globalisation and causing the erosion of
principles which had existed in the field of professional relations and social policy, as well as the
development of new relations.
Currently, trade unions vigorously protect existing jobs. Globalists want to promote changes in
employment at individual level. We are not opposed to these changes if the worker is prepared to
accept them. Naturally, we defend existing jobs and we are in favour of creating new jobs rather than
just changing them, for a potentially lower sum total.
Trade unions have fought to ensure that workers are supported by a passive income (unemployment
benefits). Globalists, meanwhile, want an active labour market policy.
We are not opposed to an active labour market but we cannot support the abolition of the policy of
supporting jobseekers, at least for as long as there are jobseekers.
In many countries, including Latvia, trade unions have made it possible for people to take early
retirement; globalists, meanwhile, propose various forms of aid for older workers. We support both
options, but it must be in the older worker's interest not to choose early retirement.
There are major challenges involved in defending the "European social model", in other words
considering society as an area of labour law and social law, but at this time liberal ideology wants to
develop society solely as a market.
We want labour law to include the right to work, a key element of cohesion and social security. This
right is currently threatened by the concept of flexibility, which can only be interpreted as
impoverishing European labour law and jeopardising social protection. We are also deeply concerned
by the fact that the whole of Europe is being made subject to the market economy, including the
energy sector. The generation and supply of electricity affects every citizen, sector and company in
every Member State. The Latvian energy system has been restructured on the basis of an artificial
system unsuited to local conditions. The restructuring of the energy system does not allow
competition to develop since with only 1 200 000 consumers, Latvia is too small. Account has not
been taken of the fact that it is not even possible to develop a market for the Baltic States since in
Estonia, the opening up of the free market has been postponed until 2017 and in Lithuania, although
official, the free market is not yet operational.
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-3We have abolished a vertically integrated society which kept prices low and allowed start-up
companies to survive. In the vertically integrated system, profits were reinvested at every level –
generation, transmission, distribution. This is very important considering the breakdown of
maintenance costs for these categories.
Distribution - 60%
Generation - 20%
Transmission - 20%
Latvia has asked the European Commission to take account of the national interest and not to bring
this company into the free market since it is not feasible in Latvia. Latvia is not comparable to the
United Kingdom or the Netherlands, where population density and therefore consumption is much
higher. This company has never shown any signs of stagnation - on the contrary, it was diversified
and vibrant. Latvia's vertically integrated energy system survived the crisis which followed
independence, when energy consumption dropped by 60% with the collapse of the largest companies.
The company did not stagnate: it underwent major shifts which satisfied Europe's requirements:
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the principal activity was separated from secondary roles;
the administration was downsized;
independent generators were guaranteed freedom of access to transmission networks;
the transmission system was opened up to the transmission of electrical energy;
30 to 50% of electricity was bought at competitive prices;
an independent transmission network operator had been established;
transparent pricing for distribution, generation and transmission was guaranteed;
investment was financed using the company's own profits, with very favourable credit conditions;
preparations had been made to establish an independent operator for the distribution system as
well;
the rate for consumers was 0.04 euro cents/kWh.
All this was explained very clearly to Commissioner Piebalgs. The result was the following: to avoid
the sanctions with which we were threatened, Latvia had to establish a conglomerate made up of three
companies holding shares in Latvenergo; the consequence was three boards and three councils, etc.,
while overall staffing levels were speedily cut and several services were purchased abroad, which is
certainly not cheaper.
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After studying the European Commission's third energy liberalisation package, Latvia is opposed to
one provision of the proposed directive which concerns the unbundling of ownership rights of
transmission and distribution system operators and does not fit the situation of Latvia's electricity
market and cannot in itself improve its operation. Our regional electricity market is isolated. It is not
possible to establish a common market with the Baltic States, and due to the absence of partnerships it
is not possible to establish a common market with the northern states either.
The Latvian energy ministry has expressed its objections, but the pressure has continued and no
company has been set up. Why? Because legislators are suddenly trying to rank energy with ordinary
goods like washing powder. Mr Barroso, president of the European Commission, has announced that
electricity must be sold like any other supermarket product. Energy supply is a key service, a social
service. This abnormal globalisation damages not only Latvia but every new EU Member State.
According to the promises made, opening up the energy market will lead to lower prices for
consumers, higher investment and new working methods. This has not happened – the globalists'
promises have come to nothing.
Commercial operators, small and large enterprises, key companies, individual users and trade unions
are unanimous: the electricity market cannot and will not function in an overly global environment if
the stability and security of energy supply are not assured.
I would also like to say that the Cato Institute, an American think tank championing the free market
and the reduction of government influence, acknowledges that decision-makers and political analysts
are almost completely ignoring a wealth of scientific studies proving the efficiency of vertically
integrated energy systems. That is to say, they are ignoring the potential advantages of a vertically
integrated system.
The European Federation of Public Service Unions (EPSU), with eight million members from
215 trade unions, is fully aware of the importance of a stable supply of gas and electricity at the
lowest possible price and of the fact that the safest solution is therefore to maintain a stable internal
energy market in each country. Professor Steve Thomas of the University of Greenwich has examined
studies conducted by KEMA, Eurelectric, DG Energy, etc. and concluded that liberalising the energy
market has not brought lower prices in the energy sector. The model of liberalisation imposed on
Latvia is proof of this: prices have risen by 50%. After studying price policy in the United Kingdom,
Professor Phil Ride reached the conclusion that gas and electricity prices have been outpacing the rate
of inflation by a considerable margin since 2002.
Detailed studies have been conducted on the situation in the United States, the Netherlands and other
European countries. The conclusion is always the same: a rapid rise in prices and a drop in energy
stability.
Harmonising energy prices has hit the inhabitants of central and eastern Europe particularly hard,
since rising electricity prices have driven up the prices of all products, leading to strong inflation. The
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-5exercise of restructuring energy companies is also very expensive. Commissioner Piebalgs has
announced that by 2030, the price tag for restructuring successfully will be EUR 1.79 trillion,
i.e. EUR 71 600 000 000 per year for 25 years; all to create gigantic structures which will be centred
purely on profit and which will swallow up small enterprises. In order to stimulate competition,
astronomical sums must be invested in advertising. In the first quarter of 2007, three Dutch companies
spent EUR 6.75 million on advertising, i.e. 33 million per year for the Netherlands alone, when this
money could more usefully be invested. The price of competition is much too high.
Here are the results of two studies conducted by EkoTek on employment in energy companies after
restructuring and in the context of globalisation:
1990-1998:
1998-2004:
250 000 jobs lost;
250 000 jobs lost.
A study conducted by the European Federation of Public Service Unions (EPSU) shows that
restructuring energy companies has led to the loss of 330 000 jobs in the EU.
Here are the figures for the energy company Latvenergo:
2001: 6701 employees;
2002: 6581 employees;
2003: 6556 employees;
2004: 6136 employees;
2005: 5673 employees;
2006: 5170 employees;
2007: 4375 employees.
The situation is dramatic. The number of employees has dropped substantially: by 34.7%.
Conclusions:
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many jobs are lost in the course of restructuring, with no concurrent drop in consumer prices;
as a result of the outsourcing of certain services, working conditions deteriorate and wages drop;
young and older employees are the most affected by the process of liberalisation;
it becomes difficult to solve problems related to job protection;
resources earmarked for training and scientific studies are cut;
prices for consumers and industry rise;
market investment is insufficient to guarantee a stable energy supply.
We can thus conclude that ranking energy with goods such as washing powder and introducing the
free market at any price have given birth to a project designed to reduce employment.
In Latvia, the drop in employment is also due to the fact that EU funds are used to stop the production
of sugar (EU funds paid for the abolition of the sugar industry, with 1000 jobs lost in the agricultural
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-6sector; these funds were also used to dismantle the factories). The same situation prevails in the
fishing sector, with fishermen being paid to demolish their boats.
Money received from the EU for various projects is primarily intended to meet very specific targets,
most often establishing infrastructure. Obviously, every country needs good roads, clean water, etc.
but carrying out these projects boosts employment on a strictly short term basis. It is not a solution to
long term employment policy objectives.
I believe that it would be better to heed EPSU's conclusions and seriously consider whether the free
market should be applied to the energy sector before it is too late.
Member States should be left to their own devices to set a fair price for electricity, taking account of
social issues. It might be wise to stop digging and to get out of the hole while there is still time.
Objectives to reduce poverty must be set, bearing in mind that the social Europe is important. The
social Europe must create new jobs and provide social services aiming to guarantee social protection
and the right of citizens to work and to earn a wage.
I believe that the global campaign "Decent Work for Decent Life" is extremely useful and it will be
supported actively by trade unions in Member States.
Author:
Jevgenija Stalinadze,
Member of the board of the Free Trade Union Confederation of Latvia,
President of the Latvian trade union "Energy"
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