Opinion of the Economic and Social Committee on "Latvia and Lithuania on the road to accession"
Date: 2002-09-18
Institutions: European Economic and Social Committee
Subjects: Latvia, Lithuania, accession negotiations, accession to the European Union, economic and social cohesion, market economy

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6.3.
Attribution of parental rights, as well as access and
visiting rights, etc., are covered by the current Proposal.
Adopted children are on the same footing under the Proposal
as are natural children. The Committee understands, however,
that it is not currently the intention to include the actual
adoption procedures within the scope of the Proposal. This
seems somewhat contradictory, as adoption could be con-
sidered as the ultimate ‘attribution ... of parental responsibility’.
The Committee recommends that adoption procedures should
be covered by this Proposal.

6.4. Maintenance remains covered by a separate instrument.
As maintenance is almost invariably a matter of urgency, it

recommends that jurisdiction, recognition and enforcement in
maintenance cases should be on the same footing as the
proposed instrument for recognition and enforcement of
commercial agreements.

6.5.
A significant problem exists within the European
Union (although sometimes emanating from without) of
abandonment of children and abuse of parental authority in
relation to a child. The Committee requests the Commission
to consider this issue, by means of research into the problem
and to take appropriate action suggested by the results, with
the aim of producing child-centred measures.

Brussels, 18 September 2002.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on ‘Latvia and Lithuania on the road to accession’

(2003/C 61/16)

On 16-17 January 2002 the Economic and Social Committee, acting under Rule 23(3) of its Rules of
Procedure, decided to draw up an opinion on ‘Latvia and Lithuania on the road to accession’.

The Section for External Relations, which was responsible for preparing the Committee’s work on the
subject, adopted its opinion on 5 September 2002. The rapporteur was Mr Westerlund.

At its 393rd Plenary Session (meeting of 18 September 2002), the Economic and Social Committee
adopted unanimously the following opinion.

A. COMMON BACKGROUND

— 1995: both countries sign Europe Agreements with the

EU;

1. The road towards EU accession

— 1995: both countries introduce their applications for

accession;

1.1.

From self-government to referendum

countries;

— 1998: both countries are recognised as candidate

When Latvia and Lithuania gained their independence in 1991,
both countries speedily set their sights on EU membership.
Milestones on the way were:

— 1993: the meeting of the European Council in Copenhag-
en, where it was decided that countries having concluded
a Europe Agreement could become members;

— in March 2000 the actual negotiations started.

Latvia and Lithuania embarked on negotiations after the first
wave of candidate countries. The negotiations have, however,
progressed quickly because substantial efforts have been made
and nothing now lags behind. The Laeken European Council
in December 2001 stated that Latvia and Lithuania were

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among the ten countries with which negotiations should be
concluded at latest by the end of 2002, in order that they shall
be able to participate in the 2004 European Parliament
elections as members.

1.2.

Involvement in the Baltic Sea area and the EU’s Northern
Dimension

Development since 1991 has been strongly influenced by the
steadily increasing contacts at all levels between Latvia and
Lithuania and their neighbours in the Baltic Sea area. The three
Baltic States have also developed structures for cooperation
with each other. They participate actively in the Council of the
Baltic Sea States (CBSS) and there has been close cooperation
in key areas with Russia, the Nordic countries, Poland and
Germany. Through the EU’s Northern Dimension initiative,
geographically defined as the Baltic Sea area, problems and
scope for development of major interest to both countries
have been the focus of attention, as well as in the debate within
the EU.

This development has made it possible for Latvia and Lithuania
to participate in increasingly strong networks in the Baltic Sea
area, which includes northwest Russia and Kaliningrad. These
networks consist of political institutions, towns and regions,
enterprises and business contacts, civil society organisations
and private persons. The ministers for trade and economic
affairs are making efforts to facilitate economic cooperation,
including achievement of the target of a maximum two
hours cross-border passage for transport of goods within the
region (1).

When the CBSS met in Kaliningrad on 5 March 2002 under
Russian chairmanship, the role of civil society received special
attention. The Declaration of the Foreign Ministers stated: ‘The
Council encourages the intensified cooperation among non-
governmental organisations and other civil society structures
of the Baltic Sea Region. This process of networking helps to
identify priority tasks to be solved in common’. The need to
develop civil society in the region was also emphasised at the
Baltic Sea States summit in St Petersburg in June 2002.

1.3.

EESC contribution

and social relations with Russia should continue to make
progress, also after enlargement. The entire EU has a keen
interest in positive development in Russia. Lately, the EESC
has stated its view in its Opinion on ‘Strategic Partnership EU-
Russia’. In preparation for the ministerial meeting on the EU’s
Northern Dimension in August 2002, the EESC has prepared
a statement, in conjunction with representatives of organised
civil society in other countries concerned. As part of the work
on a new action programme for the EU’s Northern Dimension,
the EESC will organise, in 2003, a conference with representa-
tives of organised civil society in the Baltic Sea area. A similar
conference took place in Umeå in February 2001. The EESC is
therefore ready to pursue its efforts to bring about, and take
responsibility for, more active cooperation with voluntary
organisations and other civil society bodies in the Baltic Sea
area.

1.4. Kaliningrad

In this context it is very important to pay attention to the
special situation of the Russian enclave of Kaliningrad. On
earlier occasions the EESC has emphasised that developments
in Kaliningrad are of vital importance for the whole region as
well as for EU relations with Russia. The EESC has pointed out
that special efforts must be made to facilitate economic
cooperation and narrow the economic, social and environmen-
tal gaps between the Kaliningrad region and the surrounding
areas in Lithuania and Poland. Cooperation between the
Commission and the Council of the Baltic Sea States therefore
needs to be further stepped up.

Today the population of the Kaliningrad ‘oblast’ can travel
through Lithuania and Poland without a visa. The EESC is keen
that visa and transit questions should be solved to the
satisfaction of all parties prior to Lithuania and Poland joining
the EU. The aim must be to find flexible technical solutions
which do not compromise Schengen Agreement rules. In this
context the EESC is happy to note that Sweden is the first EU
country to decide to open a consulate-general in Kaliningrad
and it recommends that the other EU countries follow suit so
as to make it easier, for instance, to obtain a Schengen visa.

The EESC contributes to this development in several ways (2).
The EESC considers it very important that political, economic

2. Starting points

( 1) This target was set in 2000 and should have been attained in
2001. As this did not happen, the matter was a priority issue at
the Moscow ministerial meeting on 20 March 2002.

( 2) Opinion on ‘Relations between the European Union and Russia,
Ukraine and Belarus’ OJ C 102, 24.4.1995; Opinion on ‘Relations
between the European Union and the countries bordering the
Baltic Sea’ OJ C 73, 9.3.1998; Opinion on ‘Northern Dimension:
Action Plan for the Northern Dimension in the external and cross-
borders policies of the European Union 2000-2003’ OJ C 139,
11.5.2001; EU/Russia Strategic Partnership: what are the next
steps? OJ C 125, 27.5.2002.

2.1.

Scope

Civil society is the focus of the following assessment —
an assessment based on progress made in relation to the
Copenhagen political criteria, which were a precondition for
negotiations getting under way. It takes a closer look at certain
specific areas which are among the conditions for obtaining
membership. A major source is the Commission’s regular
progress reports.

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2.2. Conditions for a civil society

Between 1944 and 1991, Latvia and Lithuania were part of
the Soviet Union. The Soviet Union saw civil society as a
threat.
therefore tried to stop people from organising
themselves independently of state control.

It

The events that led to independence for the Baltic states are
usually referred to as ‘the singing revolution’. Organised in
thousands of choirs, choral societies, local associations etc.,
people voiced their reactions to a menacing superpower,
thereby also demonstrating the potential for building a civil
society. Since independence a huge expansion of civil society
has taken place in Latvia and Lithuania, with the encourage-
ment of targeted cooperation with sister-organisations in the
EU Member States, and especially on the other side of the
Baltic Sea, including Norway. The United States has provided
substantial financial support.

Development has brought radical changes in its wake on many
fronts. The trade unions are one example.

Trade unions certainly existed in the Soviet Union, but their
role was entirely confined to the system. Often they acted as
the Communist Party’s extended arm in controlling individuals.

Wages were set through administrative procedures. Strikes
were prohibited. The trade unions’ duty was to protect workers’
interests by striving to improve working conditions and to
provide workers with free time activities. The Communist
trade unions therefore took care of a wide range of leisure
facilities of different kinds. Almost 100 % of the workforce
were affiliated.

Trade union participation in Latvia and Lithuania fell dramati-
cally when the transition to democracy and a market economy
started, and it continues to fall. The low level of trade union
organisation in the ‘transition economies’ is often a sign of
progress towards a market economy and democratically viable
organisations. Now the conditions exist to build further on a
stable basis. The organisations are now generally less depen-
dent on the revenue they derived from property and other
financial assets which they had inherited from the old system.

2.3. Adaptation to EU membership

Latvia and Lithuania were fully integrated in the centrally-
governed Soviet Union. Since their independence they have
had to build up a new administration, their own judicial
system and other bodies necessary to an independent state.

The agricultural sector has undergone the same restructuring.
Splitting up the large ‘kolkhozy’ and ‘sovkhozy’, restoring land
to previous owners and returning to privately-run holdings is
a huge legal venture. On the other hand, the large number of
new small private holdings producing foodstuffs have provided
some measure of social protection for many people in Latvia
and Lithuania, especially during the initial stage of the tough
transitional period.

The EU Member States must not only adapt national legislation
to the EU rules, i.e. transpose EU rules. The ‘acquis communau-
taire’ must also be implemented, i.e. observed in practice. A
large part of the rules governing the internal market are in fact
about products and product safety, production processes, the
working environment, labour law etc. and can be implemented
in practice only in enterprises and by their personnel.

The membership negotiations are thus not only a question for
civil servants and politicians. The social partners and other
representatives of civil society, such as organisations rep-
resenting farmers, consumers, environmentalists etc., must
also be involved and informed.

The EESC is convinced that the early involvement of the social
partners and other NGOs will ensure a better understanding
of the EU rules and proper implementation of them.

B. LATVIA

1. The situation in Latvia

1.1.

Population

Latvia has a population of 2,37 million. According to the
1998 population census, 56 % were Latvian and 32 % Russian.
Other language minorities included White Russians (4 %),
Ukrainians (3 %), Poles (2 %) and Lithuanians (1 %). The
majority of the Latvian population lives in rural areas whereas
the Slavonic population mostly lives in urban areas. In the
capital, Riga, where half the population lives, 47 % are
Russians. Communities are mixed. No region in Latvia can be
said to be Latvian or Russian. The town of Daugavpils in
south-east Latvia, where 80 % of the inhabitants are Russian,
must be regarded as an exception.

The industrial sector’s shift from centrally planned production,
structured in large state-owned units and tailored to the
to the diversification
requirements of
necessary in a modern state with an open economy is a
laborious process and has resulted in high unemployment.

the Soviet Union,

The Latvian language is most closely related to Lithuanian, but
the differences are so great that it is impossible for a Latvian
and a Lithuanian to communicate with each other in their
respective languages. The Protestant, Catholic and Russian
Orthodox churches are strongly represented in the country.

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Latvia is a typical Baltic Sea state. Because of its geographical
situation Latvia is rather more interested in Baltic cooperation
than Estonia, which identifies itself with the Nordic countries,
and Lithuania which has historical ties with Poland. Because of
the large Russian minority, Latvia feels the ‘pressure’ from
Russia much more than Lithuania does.

1.2.

Political conditions

Since 1999, Latvia has had a woman president, Vaira Vike-
Freiberga, with an academic and international background
(though without a knowledge of Russian) and having worked
previously in Canada. The political situation of the country
must be seen as unstable. The current government under the
former mayor of Riga, Andris Berzins, dates from May 2000,
when the controversial Andris Skele was forced to resign. It is
built on a broad conservative tripartite coalition in parliament
(the Saeima) and has contacts with different business interests.

Ordinary parliamentary elections will be held in October 2002.

1.3.

Economy

Latvia was hit hard by the 1998 Russian economic crisis but
has had a high growth period since 2000. Growth is expected
to be 5 % or more in 2002 and 2003. The service sector
accounts for more than two-thirds of the economy and is
growing fastest, whereas manufacturing industry’s share of
GNP continues to fall. The expansion of transport, including
transit of Russian oil products, is of great importance. This
source of income is very likely to dwindle, however, as Russia,
for political reasons, is building a new transport route to the
Gulf of Finland. The rise in real earnings is expected to give a
substantial boost
the
expansion is that the balance of payments deficit is increasing,
with growing risks to the currency (Lat), which is linked with
the International Currency Fund basket of currencies (SDR).
Inflation has been under 3 % since 1999 and is not expected
to increase substantially up to 2004. Unemployment is high
— around 13 % — and in certain parts of the country it is
very high. However, the trend is downwards.

to consumption. The downside of

The trend in foreign direct investment during the five-year
period 1996-2000 was as follows: EUR 301, 460, 318, 324,
443 million. This corresponds to 5-6 % of GNP, which is
relatively high; the annual average per capita GNP is EUR 156.
A major share has gone to the banking sector.

One major problem is the black economy. Undeclared earnings
deprive the state of substantial sums in revenue. There is a
clear interconnection with the fact that the nation-building
process is still in progress and many non-citizens therefore feel
disaffected vis-à-vis the Latvian state.

1.4.

Foreign Policy

Latvia’s foreign policy is completely dominated by its aspir-
ations to join the EU and NATO. At the same time Latvia
has tried to expand cross-border cooperation with Russia.
Relations with its neighbour to the East have from time to
time been tense. Russia has not yet ratified the border
agreement with Latvia. To date, no senior Russian government
representative has visited the newly resuscitated state.

2. The Copenhagen political criteria

2.1. Democracy and the rule of law

In the partnership decision for 2002 it is stipulated that Latvia
must take different kinds of measures to secure a stable public
administration capable of applying the EU acquis. To satisfy
the criteria relating to the rule of law, a certain number of
measures also need to be taken in the judicial system. In both
cases the need to increase investment in education and officials’
salaries is stressed.

Corruption is highlighted as being a major problem. This
negative picture is reflected, for instance, in a 2001 report by
the UN body, UNDP, which points out that influential people
have exploited privatisation for their own personal interests (1).
The Council insists that Latvia must finalise its legal framework
for combating all
forms of corruption and ensure that
both legislation and anticorruption strategies are effectively
implemented.

2.2. Human rights and protection of minorities

The requirements for obtaining Latvian nationality were eased
considerably after a referendum in 1998. These concessions
also paved the way for the negotiations on EU membership.
Now almost everyone living in Latvia may apply for citizen-
ship. However, around 22 % of Latvia’s population has no
citizenship; the vast majority are Russians, White Russians or
Ukrainians.

Support measures have been taken in the form of reduced fees
for obtaining citizenship, more information and better access
to language studies. Yet there is no significant increase in the
number of naturalised persons.

(1) Latvia. Human Development Report 2000/2001. The public

policy process in Latvia, Riga 2001.

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Most non-citizens now have separate passports to replace the
Soviet passports, which expired in March 2000. With this
passport it has become easier and cheaper to get a visa to
Russia than with a Latvian passport. In other words Russia
favours the Russian speaking population at the expense of the
Latvian speakers.

3. Organised civil society

3.1. Trade unions

About 42 % of the population speak a language other than
language. The EU has pushed for
Latvian as their first
minorities to be integrated into Latvian society and,
in
language education
particular, has demanded, and funded,
programmes. In 2001 the Latvian state itself started to finance
parts of the integration programme. The lack of teachers is a
big problem. However,
low teacher salaries have improved
somewhat, which seems to make it easier to recruit teachers.
The 2000 language act formally does not discriminate but
there are many examples of discrimination on the part of the
authorities.

The Council calls, in the partnership agreement, for further
measures to integrate non-citizens and lays stress on language
courses. The Council also points the finger at discriminatory
application of the language act and demands changes.

2.3.

EESC comments

The EESC notes that Latvia has admitted that it is necessary to
improve the efficiency, responsibility and openness of the
public administration. From the angle of the individual citizen
and civil society, the EESC encourages Latvia to step up
its efforts in this direction. The EESC,
like the European
Parliament (1), would stress that a key feature of countries with
minimal corruption is a large degree of openness, a clearcut
demarcation between the exercise of power in politics and
business respectively, a politically neutral administration and
high professional standards within the judiciary.

The EESC welcomes the measures that have been taken to
facilitate the naturalisation of non-nationals. A decision in
May 2002 to waive the requirement of fluency in Latvian in
order to stand for parliament is a positive step. However, in
the long term it is unsustainable — politically, economically
and socially — for a large section of the population to have no
citizenship.

Discrimination by the Latvian authorities against Russian
speakers as well as discrimination on the Russian side against
Latvian passport-holders is unacceptable. Generally, Latvia
should make further efforts to step up anti-discrimination laws
and measures so as to comply with the acquis based on Treaty
Article 13.

Latvia has a single central trade union organisation (the LBAS).
The new state transferred to the LBAS and some of its affiliated
unions property that was considered to belong to them. The
LBAS immediately declared its independence of political
parties. The initially strong factionalism within the organis-
ation between the social-democrats and other tendencies now
seems to have been overcome.

LBAS membership has fallen to around 200 000. Unions for
employees in the public sector predominate.

Hardly 20 % of the workforce are union members. Large-scale
recruitment drives have been made, very often with Swedish
trade union support, but the results have so far not been
encouraging. Hopes are now centred on a coordinated cam-
paign to attract young workers.

3.2.

Employers’ and sectoral organisations

The Latvian Employers’ Confederation is the largest employers’
organisation in Latvia. It was formed in 1993 with the merger
of
two organisations and has developed very positively.
Its members are either sectoral associations or individual
companies. Roughly a third of the workforce in Latvia works
in companies affiliated to the Confederation. One of its priority
areas of work is to assimilate the grey economy into the
regular economy. Currently eleven of Latvia’s twenty largest
taxpayers are Confederation members.

The absence of organisations for small businesses is a problem.

The Latvian Chamber of Commerce and Industry has just over
900 members all over the country and it is growing apace. In
early 2001, according to a joint survey conducted among the
candidate countries, companies were poorly informed about
conditions under EU membership (2).

Agriculture and the food industry play a major role in Latvian
economic and social life. Farmers in Latvia are active in several
organisations but cooperation among these organisations is
not yet fully developed. The Latvian Farmers’ Federation, which
was set up in 1990, has the largest membership (1 460 paid
up members) and largely represents family farm holdings. The
Latvian Farmers’Parliament was established in 1999. The
average size of its members’ farms is 240 hectares. There
(over
is also an organisation for the previous ‘kolkhozy’
1 000 hectares large) (3).

( 1) A5-0252/2001 (16.7.2001).

(3) There is a special organisation for forest owners.

(2) CAPE 2001. Summary report, Eurochambres and SBRA, Brussels

2001.

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3.3. Other organisations

4. Specific areas

Since 1996 there has been a Centre for Non Governmental
Organisations (NGO Centre)
in Riga. The Centre receives
external financial support from UNDP, the Soros Foundation
Latvia and US and EU authorities and organisations, including
the European Commission. To date national support
for
NGOs has been very limited and no organisation has the
administrative resources necessary to apply for EU aid. There
are an estimated 1 000 or so NGOs in Latvia, most of them
local.

Since independence there have been major changes, notably in
political party structures. However, party membership is low
— the largest party has around 5 000 members. In recent
years there has been a clear trend towards people forming
organisations and voicing their demands, as opposed to
standing on the sidelines and criticising.

The consumer movement in Latvia needs reinforcing. An
authority attached to the Ministry for Economic Affairs — the
Consumer Rights Protection Centre — is responsible, among
other tasks, for servicing voluntary consumer associations.

3.4.

EESC views and recommendations

Organised civil society in Latvia has made impressive progress.
Ongoing closer cooperation with sister-organisations, particu-
larly in the Baltic Sea area, including Russia, plays a key part,
as does cooperation within the European framework. One
major objective should be to increase the membership of
organisations and member activity, thereby reinforcing demo-
cratic structures and counteracting the risk of organisations
becoming financially dependent on external aid on a long term
basis. Better coordination on a national scale would also in
certain cases facilitate greater political impact.

The government must take various steps to stimulate the
further development of organised civil society and hence
anchor democracy firmly in Latvia.

It is vital for the social partners to step up their efforts to
comply satisfactorily with the demands of the European social
model.

4.1. Market economy

The market economy operates in Latvia. The privatisation of
public enterprises has almost been completed: some larger
companies in the energy, telecommunications and shipping
sectors remain. The privatisation of land and forests is under
way and the market for agricultural holdings has started to
function. The legal framework for business operations is
largely in place. Restructuring of the banking sector has made
great progress and the capital market is operational.

Small and medium-sized businesses play a major role in the
Latvian economy. They generate more than 50 % of GNP and
provide employment for more than 70 % of the workforce.
Public programmes and new financial
facilities have con-
tributed to a positive development.

Trade is increasingly integrated with the EU. Imports from the
EU and exports to the EU are both on the increase. In 2000
commodity exports to the EU accounted for 64,6 % of total
commodity exports.

4.1.1.

E E S C c o m m e n t s

There is a risk that confidence in the market economy could
be undermined when social gaps are aggravated in tandem
with widespread corruption and tax evasion. It is incumbent
on the governing bodies in Latvia to ensure that the benefits
of the market economy are reaped by the entire population.

4.2.

Social dialogue

The tripartite dialogue is well established in Latvia. Back in
1993, a tripartite consultative committee was created, with a
maximum of 12 representatives from the public sector,
employers and trade union organisations respectively. The
committee was consolidated in 1999 through a tripartite
agreement which stated that the goal is to reach agreements in
the interests of society as a whole. The labour-market partners
take co-responsibility for decision-making and the implemen-
tation of decisions. Under this committee there is a tripartite
committee for training and employment. There are also
tripartite consultative committees for worker protection and
insurance questions.

The tripartite dialogue has proved constructive and is appreci-
ated by all partners. However, this dialogue must achieve more
effective consultation and results.

Joint consultative committees bringing together representa-
tives of organised civil society in the candidate countries and
the EESC are the EESC’s main means of carrying the enlarge-
ment process further. The EESC regrets that the Latvian
organisations feel that they lack the resources to take part in
such a committee. It looks forward to future joint activities
within its framework.

The Commission observes, on the other hand, that bilateral
dialogue between the labour market partners is still weak, both
at national and regional level. However, there are signs of
improvement. In this context it is worth mentioning that the
LBAS since 2001 has been organising training for its sectoral
organisations and regions. Collective bargaining agreements
on pay and employment have also been concluded within

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certain sectors, with the result that more than half of com-
panies with union representation are covered. In 2000 there
were 39 sectoral agreements and 2 018 agreements at com-
pany level. This means that approx. 25 % of the workforce in
Latvia is covered by collective bargaining agreements, which
means an increase of about 2 % compared with 1999.
However, dialogue must be stepped up further, especially at
sectoral level.

4.2.1.

E E S C c o m m e n t s

The EESC welcomes the positive development of bilateral and
tripartite dialogue but notes that much remains to be done
before the workforce in Latvia is reasonably protected by
collective bargaining agreements. The government should
monitor the application of such agreements more closely. Like
the Commission, the EESC would stress the government’s
responsibility for helping the parties to prepare for the active
role they will be required to play in the EU context and to
promote collective bargaining and social dialogue structures
in general. EU companies should also feel a responsibility (1).

4.3.

Labour market and social policy

Unemployment differs widely from region to region. It is
worst in the eastern part of the country, where it is several
times higher than in Riga. There is a large amount of concealed
unemployment, especially in the agricultural sector. The
Russian population has often been badly hit, since Russian
companies have been affected most by the restructuring
process. There is a serious generation and educational gap on
the labour market. Young people with up-to-date training have
very good job prospects, whereas workers with an old-style
highly specialised training land up in long term unemploy-
ment. More resources for training purposes are also a priority
in the Latvian budget.

In early 2001 Latvia adopted its second employment plan in
accordance with the guidelines of the EU’s common employ-
ment policy. The employment office network has been greatly
expanded, with noticeable success, especially as regards finding
jobs for unemployed young people. The focus is on an active
labour market policy but, in the Commission’s view, adequate
resources have not been earmarked.

The unemployment insurance scheme was reformed in 1999.
To obtain such cover, contributions must have been paid for
nine months of the previous 12-month period. The level of
benefit now depends on the period of insurance and most
recent earnings. For instance, in the case of someone who has
been insured for 20-29 years, the insurance provides 60 % of
the previous six months’
level of earnings. This benefit is
payable for no more than nine months and gradually drops to
half the original amount. The reform resulted in a cut of

( 1) The European Parliament has observed that individual EU com-
panies are hostile to trade unions and collective bargaining
agreements and it has asked the Commission to carry out an in-
depth inquiry into this situation.

around 20 % in the number of people eligible for benefit. At
the start of 2002 more than 50 % of jobseekers were receiving
unemployment benefit. This figure is set to rise, further to the
law of 1 July 2001 which entitles jobseekers to unemployment
insurance cover even if the employer has not paid contri-
butions.

There has been a rise in real earnings. Between 1996 and 2000
the per capita GNP increased from 4 700 to 6 600 Purchasing
Power Standards in current prices. That means that the gap
vis-à-vis the EU has narrowed. At the same time there are
significant differences from region to region. In 1998 average
earnings in Riga were 32 % of the EU average, but were under
20 % of the EU average in three of the other four regions of
Latvia. However, a third of the working population does not
earn more than the guaranteed minimum wage of Lat 60 per
month, and the local authorities often lack the resources to
pay that.

There are major shortcomings in social welfare policy, as
reflected among other things in the very low birthrate: 1,09
per woman, against the EU’s already low average of 1,45. A
large proportion of
the population, both employed and
unemployed, lives below the minimum subsistence level. The
grey economy and small holdings producing food for domestic
consumption — 172 000 according to 1997 statistics — are
obviously still of major importance for the survival of many
people.

4.3.1.

E E S C c o m m e n t s

Action to combat unemployment must be top priority.
That presupposes that high growth rates continue and that
economic policy and social policy measures are more effec-
tively coordinated. The EESC would draw attention to the key
role played by the social partners in the employment strategy.

The EU now prioritises measures to fight social exclusion and
an anti-poverty programme has been adopted. Latvia must
make great efforts to halt social exclusion, especially in certain
regions.

4.4. Rural and regional policy

In 2000 the agricultural sector accounted for 4,5 % of Latvia’s
GNP and 13,5 % of employment, though that is 2 % down on
1999. Consolidation of land into larger parcels is progressing
slowly. The Sapard programme for aid to development projects
in agriculture, the food industry and rural areas has got off the
ground slowly but has been operational since the end of 2001.
Most resources are channelled into processing and marketing,
modernisation of agriculture and diversification of the rural
economy, and infrastructure improvements. The EU provides
just under 40 % of the total projected expenditure for the years
2000-2006.

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The absence so far of effective central coordination and
regional structures is holding back structural policy. Minor
progress has been made in the spheres of regional policy and
coordination of different structural
instruments. The key
partnership principle for management of EU structural aid has
made no impact. However, the central authorities have given
an undertaking to administer structural aid on the basis of this
principle, and a major conference with the parties concerned
was held in March 2002. The Commission has insisted that a
single programming document must be submitted by the end
of 2002.

planned economy to a market economy. The EESC calls on all
parties concerned to concentrate their efforts on solving these
problems.

C. LITHUANIA

1. The situation in Lithuania

4.4.1.

E E S C c o m m e n t s

1.1.

Population

In the agricultural sector, the EESC particularly stresses the
need for a rural development policy. The authorities must
support the agricultural organisations and cooperate with
them, especially as regards disseminating information effec-
tively to the more disadvantaged sections of the population,
who are often opposed to EU membership.

As regards regional policy, the EESC underlines the importance
of ensuring the breakthrough of the partnership principle.
This principle holds the key to success when framing and
implementing regional aid programmes (1).

focus as far as possible on investment

In the EESC’s view both rural and regional policy in Latvia
in human
must
resources, i.e. education/training and lifelong learning, as well
as promoting vocational and geographical mobility on a
national and cross-border scale. A deliberate political choice
to invest in the knowledge society should also make it easier
to achieve long-term positive results in the negotiations on EU
agricultural and regional aid. Concurrently investment
is
needed to restructure the industrial sector and to develop
infrastructure.

5. Conclusions and recommendations

The EESC congratulates Latvia on its rapid progress on the
road to EU accession and is convinced that the remaining
negotiations can be wound up by the end of 2002 at latest
and will pave the way for a referendum. The democratic
process requires this referendum to be preceded by extensive
information and public debate, thus making major demands
on contributions from the authorities, the media and civil
society organisations.

In the EESC’s view, the results of the forthcoming referendum
will be greatly influenced by the extent to which Latvia
manages, with the support of the EU and the Member States,
to solve the political, economic and social problems connected
with nation-building and the transition from a centrally

( 1) ESC opinion CES 1480/2001 makes particular mention of the

social partners.

With its 3,7 million inhabitants, Lithuania is the largest of the
three Baltic republics. The country is also ethnically the most
homogenous, with 80 % Lithuanians, 11 % Poles (most of
them living in the capital, Vilnius) and 8 % Russians, with
small White Russian and Ukrainian minorities.

Lithuania differs from both the other Baltic States in that it can
claim a proud history, much of which it shares with Poland.
All Lithuanians know that the nation once stretched from sea
to sea, i.e. from the Baltic to the Black Sea. Before the Second
World War Lithuania had a large Jewish population and
Vilnius was an important Jewish centre. Roman Catholicism is
now the dominant faith.

1.2.

Political conditions

Since July 2001 Lithuania has had a centre-left coalition
government which succeeded a conservative-oriented govern-
ment. It is headed by Algirdas Brazauskas, who has mobilised
the support of several social-democratic groups and also
established a coalition with a small liberal socialist party. The
conditions for this government to last the full term (i.e. until
2004) seem good.

The current President, 74-year-old Valdas Adamkus, has lived
most of his life in the United States. It is still not clear whether
he will be a candidate in the presidential elections at the end
of 2002, when the popular Brazauskas is expected to stand as
candidate.

1.3.

Economy

The Russian crisis hit Lithuania rather late and the result in
1999 was a downturn of about 3 %. Agriculture was very
badly affected by the decline in demand from Ukraine and
Russia and the abolition of protective duties. Drastic financial
measures were necessary to restore confidence and create the
base for recovery. Though the upward economic trend has
been sluggish, the Lithuanian GNP is expected to rise by 4,5 %
in 2002 and by 5 % in 2003. This upturn is essentially due to
increased exports of refined oil products in particular — a
trend which can, however, be quickly reversed. The energy
sector as a whole enjoys a special status in Lithuanian society,
which is heavily dependent on crude oil and gas from Russia.

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Though private consumption is only increasing slowly, real
earnings are rising. The balance of payments is now more
healthy than for a long time. Inflation, which for several years
was around 1 %, is now expected to increase to 2,5 % in 2002
and to 3 % in 2003. It is not expected to be influenced by the
linking of the currency (Lit) since February 2002 to the EUR
instead of the dollar. The unemployment rate is high — 16 %
— but is expected to drop slightly in 2003.

Foreign direct investment has not been encouraging and is
largely connected with privatisation. In 1999 it accounted for
5,5 % of GNP and in 2000 for 2,5 %. However, this trend is
set to change. The annual average per capita for the period
1996-2000 was EUR 115.

1.5.2.

E E S C c o m m e n t s

Ignalina is not only a vital national issue for Lithuania but also
of key importance to the whole EU and its neighbour states.
The EESC believes firmly that Ignalina must be closed in line
with the established plan. This plan must, however, be executed
in a way that allows the population of Lithuania, and especially
in the areas around Ignalina, to be provided as speedily as
possible with constructive, realistic economic and employment
alternatives. This presupposes joint efforts by, in the first
instance, Lithuania, and by the individual Member States and
the EU. The EESC would emphasise that the whole process
must be conducted with total transparency and in constant
dialogue with all parties concerned, especially the social
partners.

1.4.

Foreign policy

Lithuania’s foreign policy is completely dominated by its
aspirations to join the EU and NATO. In relations with Russia
the Kaliningrad issue is of key importance. Here Lithuania
plays a role as mediator between the EU and Russia. A clear
sign of Moscow’s appreciation of this role was the visit paid
by the Russian foreign minister to Vilnius in March 2002 —
the first Russian visit at such a high level to any Baltic State.

1.5.

The Ignalina nuclear power plant

1.5.1. T h e c u r r e n t s i t u a t i o n

One EU requirement is the shutting down and dismantling of
the Russian-built nuclear power plant of the Chernobyl type,
Ignalina,
in the town of Visaginas in north-east Lithuania.
Lithuania agreed early on to close down one of the reactors in
2005, and an agreement in principle was reached on the other
one in June 2002 which entails closure in 2009. The EU is
willing to compensate Lithuania financially. The Ignalina
plant’s two reactors produce more than three-quarters of
Lithuania’s electricity consumption besides generating export
revenue.

The population takes a very negative view of EU demands
regarding Ignalina. Quite apart from the practical and social
aspects, there is a psychological factor. These demands symbol-
ise external control of the kind that, it was hoped, would cease
on independence. The trade unions are heavily critical of the
fact
that almost nothing has been done to prepare the
retraining of the 7 000 or so persons who currently work at
Ignalina or who are indirectly dependent on the power plant.
One special problem is that most of the workforce is Russian-
speaking and has major difficulties in finding jobs in other
parts of Lithuania. The
town of Visaginas with its
33 000 inhabitants is threatened with bleeding to death and
the whole Utena region with 200 000 inhabitants could be
seriously affected.

2. The Copenhagen political criteria

2.1. Democracy and the rule of law

The latest Council partnership decision stipulates that Lithuan-
ia must adopt a variety of measures to secure a stable public
administration capable of applying the EU acquis. To satisfy
the criteria relating to the rule of law, a certain number of
measures in the judicial system also need to be taken. In both
cases there is clearly a need for investment in education and
for an increase in civil servants’ salaries.

Corruption is highlighted as being a major problem. The
Council insists that Lithuania must finalise its legal framework
for combating all forms of corruption and ensure that both
legislation and the anti-corruption strategy are effectively
implemented.

The Council makes no special demands on Lithuania as regards
human rights and protection of minorities.

2.2.

EESC comments

Central administration is impeded by the confused dividing
line between politics and administration, which causes a lack
of clarity and continuity. Another problem is constant staffing
changes stemming largely from civil servants’ conditions of
employment. There is little cooperation between central
government and the regional and local level. It is vital for the
bodies concerned to tackle these problems seriously, paying
careful attention to the Commission’s proposed measures. A
plan to redraw regional boundaries should wait.

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The European Parliament has noted that corruption in the
political sphere does not seem particularly prevalent, but
that, on the other hand, administrative corruption is a
big problem (1). The EESC encourages those responsible in
Lithuania to pursue their efforts to remove the causes for
citizens’ distrust of the authorities and legal system, including
the police.

The Lithuanian Chambers of Commerce, Industry and Crafts
are organised in five regional chambers and have a total of
around 1 600 members. At the start of 2001 ;companies
were relatively poorly informed about conditions under EU
membership (2). The Chambers have taken the initiative of
drawing up a company register which is updated regularly.

3. Organised civil society

3.1.

Three central trade union organisations

The trade union movement in Lithuania is at present coordi-
nated in three central organisations. The largest and most
representative, the Lithuanian Trade Union Confederation, was
established as recently as 1 May 2002, through the merger of
the Lithuanian Trade Union Centre and the Lithuanian Trade
Union Unification. The new organisation has around
100 000 members. The European trade union movement —
especially in the Nordic countries — has supported this trend
away from fragmentation in different ways; membership of
ETUC is a natural consequence. The Workers’ Union, which
changed its name in 2002 to the Lithuanian Trade Union
Solidarumas, was set up with support from the United States
(AFL-CIO). The union is based on direct subscription and its
membership is estimated at 52 000. The Lithuanian Labour
Federation dates back to the time between the two World
Wars and was revived by the christian-democrat party. It has
2 000-3 000 members.

The Commission’s report for 2001 estimates that 13 % of the
workforce are union members, which means a slight increase.
Some restrictions apply as regards permission for civil servants
to join trade unions. Rights over property inherited from the
communist trade union have blighted trade union relations in
Lithuania for many years. Different political factions have tried
to favour their trade union friends. However, the matter now
rests with the trade unions, which will have to work out a
solution for themselves.

3.2.

Employers’ and sectoral organisations

The largest employers’ organisation, the Confederation of
Lithuanian Industrialists (LPK), was set up in 1993. It comprises
sectoral associations and individual companies and embraces
a total of 2 800 companies, most of them small and medium-
sized businesses. There is no direct recruitment drive. The
Confederation has a well structured secretariat, including an
international section. It has observer status in Unice and will
shortly become a full member. One of the Confederation’s
main aims is to achieve more effective dialogue between the
social partners and the government.

In recent years the farmers’ organisations have cooperated to
some extent, especially on EU issues. The Lithuanian Farmers
Union (LFU) with 15 000 paid-up members was set up back
in 1989 and represents private holdings. The LFU is well set to
become a modern, democratic and representative organisation
for private farmers. The Landowners Union has limited
membership and influence. The Association of Agricultural
Companies (Bendroves) represents the large agricultural com-
panies. The Lithuanian Chamber of Agriculture, with its compul-
sory membership and state funding, enjoys a special status. It
was set up in 1925 and re-introduced under a 1997 law.

3.3. Other organisations

Since 1995 a Non-Governmental Organisation Information
and Support Centre(NISC) has been active in Vilnius. It receives
financial support from UNDP, the Soros Foundation and US
and EU authorities and organisations, including the European
Commission. The government gives some support to NGOs,
and donors can claim tax deductions. There are an estimated
5 000 active NGOs in Lithuania, about half of which (mostly
local) have contacts with the NISC. During the initial post-
independence period there was an NGO bloc in parliament; in
1991/1992 these NGOs formed political parties. A process of
stable development is now under way, enhancing this sector’s
potential
influence on policymaking. The NISC specifically
mentions public health care.

Under its 1996 charter, the Lithuanian Consumer Association
is an official organisation with individual membership. It is
divided into 13 regions and has received financial support
from the European Commission and the Nordic Council,
among others, and now, most recently, from the Lithuanian
government.

3.4.

EESC views and recommendations

Organised civil society in Lithuania has made impressive
progress. Ongoing closer cooperation with sister-organis-
ations, particularly in the Baltic Sea area, including Russia,
plays a key part, as does cooperation within the European
framework. One major objective should be to increase the
membership of organisations and member activity, thereby
reinforcing democratic structures and counteracting the risk

( 1) A5-0253/2001 (16.7.2001).

2001.

(2) CAPE 2001, Summary report, Eurochambres and SBRA, Brussels

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of organisations becoming financially dependent on external
aid on a long-term basis. Better coordination on a national
scale would also in certain cases facilitate greater political
impact. The EESC welcomes the increased cooperation among
trade unions and the agricultural organisations.

The government must take various steps to stimulate the
further development of organised civil society and hence
anchor democracy firmly in Lithuania.

It is vital for the social partners to step up their efforts to
comply satisfactorily with the demands of the European social
model.

The EESC welcomes the Lithuanian organisations’ readiness to
set up a joint consultative committee with the EESC and looks
forward to future joint activities within the EESC.

4. Specific areas

4.1. Market economy

The market economy operates in Lithuania. The privatisation
of public enterprises has made good headway, as have
preparations to privatise what remains. The right of ownership
is well established. The handing back of land and forests is
under way and the market is starting to function in this area,
which is conducive to sustainable agriculture. Restructuring of
the banking sector is far advanced and the capital market is
operational.

Trade is increasingly integrated with the EU, even if more
slowly than in other countries. The second most important
trade partner is the other candidate countries. Exports to the
EU are rising. Trade with the Newly Independent States has
dropped sharply after the Russian crisis in 1998. Lithuania
joined the World Trade Organisation in 2001 (Latvia has been
a member since 1999).

96 % of Lithuanian companies are regarded as small or
medium-sized. The state budget now includes a separate
heading for promotion of SME development, but very little
has been done to implement the planned programme.

4.2.

Social dialogue

Tripartite cooperation at national
level operates within the
national tripartite council set up in 1995. It has 15 members
with equal rights, five from each party. The chairmanship is
rotated on a four-monthly basis. The government is represent-
ed by delegates from the ministries concerned.

Existing cooperation is based on an agreement from Februa-
ry 1999 which aimed to improve quality and efficiency. It was
signed by the prime minister at the time, the four central trade
union organisations and three employers’ organisations. The
government promised among other things to take up relevant
legislative questions in the council and to inform the Seimas
about the council’s conclusions. The social partners, on their
side, promised not to take action against the government
in matters on which the council had reached agreement.
Cooperation and exchange of information in the preparations
for EU membership are a special point.

One of the tripartite council’s major tasks is to propose the
legal minimum wage. This indirectly affects wages within the
public sector in particular, since these are frequently expressed
in multiples of the minimum wage.

The Commission notes that the tripartite dialogue needs to be
stepped up and to operate in such a way that the partners are
consulted in key economic and social areas.

Bilateral dialogue has made very little headway — only 10 %
of the labour market is covered by collective bargaining
agreements, and these are mainly in the public sector. There
are hardly any agreements at sectoral or company level. The
Commission stresses that efforts must be made to strengthen
bilateral dialogue, especially at sectoral level. It calls on the
government to support the parties in preparing for the active
role that they will be required to play in the EU context and in
order to participate in social dialogue and negotiations at all
levels.

The government, for its part,
is worried that the lack of
collective bargaining between the social partners at different
levels could give the minimum wage undue influence. The
labour code adopted in summer 2002 includes a more
positive collective bargaining framework, covering training in
negotiation techniques for social partners. The code also aims
at better representation, information and consultation for the
workforce.

4.1.1.

E E S C c o m m e n t s

4.2.1.

E E S C c o m m e n t s

Major sacrifices have had to be made in order to create a stable
economy, resulting in growing social gaps. Confidence in the
market economy could well be undermined if these social gaps
become wider. It is incumbent on the governing bodies in
Lithuania to ensure that the benefits of the market economy
are reaped by the entire population. The energy sector’s
dominance of Lithuanian society must be kept under control.

The EESC regrets that bilateral and tripartite dialogue in
Lithuania leaves much to be desired. Only a very small
proportion of the workforce is protected by collective agree-
ments, and the tripartite dialogue on political issues, including
matters relating to EU accession, would seem more theoretical
than real. Like the Commission, the EESC would stress the

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government’s responsibility for helping the parties to prepare
for the active role they will be required to play in the EU
context and to promote collective bargaining and social
dialogue structures in general. The EESC expects new labour
legislation to improve matters.

4.3.

Labour market and social policy

Average unemployment, estimated at 16 % in 2000 according
to ILO criteria, varied significantly from region to region.
Widespread long-term unemployment is a major problem. In
May 2001 the government adopted an active labour market
programme which aims to substantially reduce registered
unemployment. This includes dynamic action to find jobs for
workers through a well developed network of employment
offices. One target for 2004 is that anyone who is still
unemployed after three months should be offered an active
support measure. Over 5 % of the plan’s funding comes from
the EU (1).

Unemployment insurance in its present form is limited. In
order to receive benefit, contributions must have been paid for
24 months during the previous 36-month period. The level of
benefit depends solely on the length of the insurance period
and varies between 19 % and 34 % of the average monthly
wage. Latest statistics indicated that 15,2 % of registered
unemployed persons received benefits under the insurance
scheme.

The social welfare policy includes means-tested forms of
assistance which are managed by the local authorities. These
consist of social help, contributions to home heating costs and
free access to health care and child care (nursery school and
school), etc. A large proportion of the population lives under
the minimum subsistence level.

The government is planning a reform of both components of
the social welfare system.

Real earnings have risen. Between 1996 and 2000 they
increased by 36 %, but growth was more sluggish the last two
years. The gap vis-à-vis the EU has therefore narrowed. The
minimum wage (Litas 430 for 1999) corresponded in 2001 to
40 % of the average wage. It will not be increased in 2002.
Instead tax will be reduced for low income earners under a
tripartite council agreement.

A large section of the population, both employed and unem-
ployed,
lives under the minimum subsistence level. Both
small holdings producing for domestic consumption (average
2,2 hectares) and family holdings (average 7,6 hectares) are of
major importance for the survival of many people. (However,
the figure of a total of 539 000 such holdings in 1997 is
exaggerated since a large proportion of smaller holdings lease
land to larger holdings.)

( 1) Programme of the Republic of Lithuania for increasing employ-
for 2001-2004 (approved by Resolution No 529 of

ment
8.5.2001 of the Government of the Republic of Lithuania).

4.3.1.

E E S C c o m m e n t s

Lithuania has the highest unemployment rate of all
the
candidate countries. Action to combat unemployment must
have top priority. That presupposes that high growth rates
continue and that economic policy and social policy measures
are more effectively coordinated. The EESC would draw
attention to the key role played by the social partners in the
employment strategy. They need to coordinate their efforts in
order to be in a position to participate effectively. The EU now
prioritises measures to fight social exclusion, and an anti-
poverty programme has been adopted.
It is important to
involve candidate country players in this programme. Lithuan-
ia must make great efforts to halt social exclusion in the
country.

4.4. Rural and regional policy

In 2000 the agricultural sector accounted for 8 % of Lithuania’s
GNP and 18 % of employment — down 2 % on 1999. The
consolidation of land into larger parcels is progressing slowly,
partly because of a delay in the handing back of land: however,
a July 2002 deadline has been set for the submission of claims.
The average size of holdings has increased to 12,76 hectares.
Prospects in Lithuania are good for agricultural production
and some rationalisation of holdings.

The Sapard programme prioritises investment in agriculture,
followed by processing and marketing, along with diversifi-
cation of the rural economy and infrastructure improvements.
The EU funds just under 40 % of total investment.

Central management of structural policy has recently improved
considerably. However, it has to contend with the fact that
regional structures still do not operate satisfactorily and the
two levels distrust each other. The key partnership principle
applicable to management of EU structural aid has failed to
make an impact. The Commission has insisted that a draft
single programming document must be submitted by the end
of 2002.

4.4.1.

E E S C c o m m e n t s

On the agricultural sector, the EESC particularly stresses the
need for a rural development policy. The authorities must
support the agricultural organisations and cooperate with
them, e.g. on the effective distribution of information to the
more disadvantaged sections of the population, who are often
opposed to EU membership.

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regards

regional policy,

As
the
importance of ensuring the breakthrough of the partnership
principle.

the EESC underlines

In the EESC’s view, both rural and regional policy in Lithuania
must focus heavily on investment in human resources, i.e.
education/training and lifelong learning, as well as promoting
vocational and geographical mobility. A deliberate political
choice to invest in the knowledge society should also make it
easier to achieve long-term positive results in the negotiations
on EU agricultural and regional aid. Concurrently investment
is needed to restructure the industrial sector, especially the
food industry, and to develop infrastructure.

Brussels, 18 September 2002.

5. Conclusions and recommendations

The EESC congratulates Lithuania on its rapid progress on the
road to EU accession and is convinced that the remaining
negotiations can be wound up by the end of 2002 at latest
and will pave the way for a referendum. The democratic
process requires that this referendum to be preceded by
extensive information and public debate, thus making major
demands on contributions from the authorities, the media and
civil society organisations.

In the EESC’s view, the results of the forthcoming referendum
will be greatly influenced by the extent to which Lithuania
manages, with the support of the EU and the Member States,
to solve the political, economic and social problems connected
with the transition from a centrally planned economy to a
market economy. The EESC calls on all parties concerned to
concentrate their efforts on solving these problems.

The President

of the Economic and Social Committee

Göke FRERICHS