Latvia: From the Soviet Union to the European Union

The Magomedova family Latvian firm Baltas Naktis is a family-run biscuit business

A warm, rich buttery smell wafts from a factory sitting on the edge of a housing estate on the outskirts of Riga.

Inside, workers in their yellow and green uniforms knead freshly mixed dough, operate production lines and wrap biscuits in boxes for sale.

Baltas Naktis was established in 1995 by Elena and Andrey Magomedov. The couple had left the Soviet Union in 1990 in search of a better life once the Iron Curtain had fallen.

Starting from humble roots, the confectionery business used to have just four employees. However, it has now expanded to employ more than 80 people, baking about 10,000 biscuits and crispbreads every day.

"Latvia is a very young country and the tradition of business is only just developing," says their daughter Ksenija Magomedova, the company's sales manager.

"Our business is one of a kind because there aren't very many family businesses in Latvia," she adds.

"Lots of people have left the country and businesses have been sold because the economy over the past 20 years has been so volatile."

Start Quote

I believe that complete freedom and independence are more important than joining the European Union”

End Quote Janis Dzenis Arable farmer
'More opportunities'

But the entrepreneurial Magomedov family believes Latvia's fortunes have been on the up since it joined the the European Union 10 years ago.

"We have more export opportunities, we have become more competitive, we make more products than ever before," enthuses Ksenija.

Turnover is up 80% from 10 years ago, but it is not just the financial aspects of being in a western economic bloc that Baltas Naktis values.

"Basically we feel safer working with EU partners. We know the companies, we can always track them and trace them. We feel safer sending our goods there and receiving the payments," says Ksenija.

Farmer Janis Dzenis Farmer Janis Dzenis with one of his tractors bought with EU funds

While the business community backed joining the EU, as many as a third of the population voted against in the national referendum in 2003.

Start Quote

If you look at my children, Europe is home for them - they feel much closer to that than they do to anything even a few hundred miles to the east of here”

End Quote Pauls Raudseps Journalist

One of them was farmer Janis Dzenis.

One hundred kilometres south-east of the capital Riga, in rural Latvia, he shows me around the land he inherited after the fall of communism.

The farm was repatriated to him after he used documentation to prove that his family owned the land prior to the Soviet Union seizing it as part of the common ownership policy.

Scarred by the experience of his country being part of the Soviet Union, Janis is sceptical about Latvia's membership of another union, the EU.

"I believe that complete freedom and independence are more important than joining the European Union," he says.

"[If you are independent] then you are the one that decides everything that happens in the country - economics, politics, production and agriculture."

The BBC's Joe Lynam has a look at how the EU membership has been for one of its smallest members

A decade on and Janis remains opposed to Latvian membership, despite the £300,000 he has received in EU grants over the years to help buy new tractors, machinery and three giant storage silos.

Latvia's population decline

  • 2.67 million in 1989
  • 2.5 million in 1995
  • 2.38 million in 2000
  • 2.28 million in 2004
  • 2.12 million in 2010
  • 2.02 million in 2013

Source: Central Statistical Bureau of Latvia

"Being part of the European Union, we have to accept the EU agriculture policy.

"I have thoroughly analysed these rules and I have realised that they are not like the ones that we had during our first independence in 1918. Then we had carefully developed Latvian agriculture policy and there was some tangible result.

"Currently we are losing because of the agriculture policy of the European Union and we are losing quite dramatically."

'Cliffhanger nation'

Since joining the European Union there have been some financial benefits.

For example, Latvia has received about £3.5bn in grants and the economy had almost trebled in size until the global financial crisis struck.

As a result gross domestic product collapsed, a deep recession ensued and emigration became increasingly popular for tens of thousands of Latvians who took advantage of one of the EU's founding objectives - the freedom of movement between member states.

St Peter's church in Riga St Peter's Church in Riga is a popular tourist destination

So for a population hovering around the 2 million mark - down from almost 2.7 million a quarter of a century ago - has EU membership changed the Latvians?

A prominent Latvian journalist, who once described Latvia as "the cliffhanger nation" because it has appeared and disappeared from the map so many times, seems like the perfect person to ask.

"I think you have to look at generations," says Pauls Raudseps.

"The older generation which grew up in the Soviet Union still feels a little distant from [the EU] because they have no direct personal experience with that, their childhood memories are in the Soviet times,

"But if you look at my children, Europe is home for them - they study there, their friends live there, they go there often and they feel much closer to that than they do to anything even say a few hundred miles to the east of here."

More on This Story

More Business stories


Business Live

    08:43: Greek election BBC Radio 4

    Mr Varoufakis quotes Dylan Thomas (which doesn't happen every day on the live page). The glimmer of light he says came on Sunday when the Greek electorate "chose "to stop going gently into the night and to rage against the dying of the light." Now Greece can have a rational conversaation with its European partners about what to do next, he says.

    08:37: Paper review

    Unsurprisingly, this morning's papers are united in leading on the Greek election result. The Times reports Greece "sent shockwaves across Europe," while the FT calls it a "momentous poll victory" for Syriza. The Wall St Journal says an "astonishing upset of Europe's political order" is on the cards, while the Telegraph puts Greece on a "collision course" with the rest of Europe.

    08:24: Greek elections BBC Radio 4

    Yanis Varoufakis, who has just been elected to parliament in this weekend's Greek poll and has been talked of as a possible finance minister talks to Today. He says Europe, in its infinite wisdom, responded to Greece going bankrupt by "unloading the largest loan in human history on the weakest of shoulders.... on condition that the bankrupted nation was going to have to shrink its income by a quarter". He adds: "An eight or nine-year-old can understand this will not end well. What we have had since... is a kind of fiscal water boarding policies that have turned Greece into a debt colony."

    08:16: Greek elections BBC Radio 4

    There are "some pretty hardcore" anti-capitalist, anti-austerity, anti NATO, anti-negotiation, anti-Europe members of Syriza, Constantine Buhayer, Greek country analyst at Jane's Intelligence tells Today. Alexis Tsipras is at the head of a political coalition that includes Maoists and Communists, he says, so keeping all of those moving parts together while trying to renegotiate the Greece's bailout terms will not be easy.

    08:01: Greek election BBC Radio 4

    "The obligation on the eurozone is to come forward with an economic policy that delivers jobs and growth," Mr Osborne tells Today. It's not just about the public finances. Alongside fiscal responsibility, you have to active monetary policy and create environments in which businesses want to invest, Mr Osborne adds.

    07:46: Rolls-Royce engines

    Rolls-Royce's MTU business, which makes large diesel engines, has won a €100m order for freight locomotive engines for South African trains. The 20-cylinder engines, pictured, kick out 3,300 kilowatts of power.

    07:35: Greek election BBC Radio 4

    Speaking about the huge support for Syriza, Chancellor George Osborne tells the Today programme that with the Greek economy suffering: "I can understand why you are looking for other answers". But he adds, the party's election promises will be "very difficult" to implement. He urged Syriza and eurozone policymakers to "act responsibly" over any forthcoming renegotiation of Greece's bailout.

    07:27: Aer Lingus bid
    Aer Lingus jets parked in an airport

    Aer Lingus has confirmed that it has received a revised offer from British Airways owner IAG, which values the Irish flag carrier at €2.55 per share and therefore a little above €1.3bn. It says it is releasing the information "without the prior agreement or approval of IAG". Aer Ligus advises shareholders to do nothing at this stage adding it is "considering" the proposal.

    07:14: Cleaning up in windows

    Safestyle UK - they of the shouty window man adverts - reported 2014 revenue increased 9% to £136m. It expects pre-tax profit will meet market expectations of £16.7m, it said.

    SSE lowers gas prices by 4.1% Breaking News
    Gas rings on a cooker.

    SSE is the latest energy supplier to lower its gas prices. It says it will cut its main gas tariff by 4.1% on 30 April and extend its household gas and electricity price guarantee - meaning prices won't go up - to at least July 2016.

    06:59: Greek elections BBC Breakfast

    "The question is how Syriza is going to deliver," says Lena Komileva of G+ Economics on Breakfast. Promising to rehire workers and its other campaign pledges "without running Greece into an economic catastrophe" will be difficult to do, she says. Negotiating some leeway with the European Central Bank, European Union and International Monetary Fund - the institutions to which it owes money - will be the likely plan, she adds.

    06:46: Greek elections BBC Radio 4

    So now Syriza has won this weekend's Greek election, what happens next? There are going to have to be some renegotiations. That might lead to something being put to the European Commission that can bring about a deal, Greek economist, Vicky Pryce tells Today. She says "of course, they're [the EU] not going to like it ..... and will say at first no way are we going to do a deal with you". But eventually the EU will have to negotiate, she says.

    06:32: Tax collection Radio 5 live

    More on tax. Wake Up to Money presenter Adam Parsons asks, if you pay your tax, surely there's no problem? "People will always do things which are sometimes debateable if tax is payable or not," says Mr Bullock. Richard Murphy of Tax Research UK says £137m is a "paltry effort compared to the amount of tax not being paid."

    06:21: Tax collection Radio 5 live

    James Bullock, a partner at Pinsent Mason specialising in tax is on Wake Up to Money. A crackdown on tax avoidance and evasion by people who HM Revenue & Customs call "mass affluent" netted 60% more money in 2014, his firm's report says. It raised £137.2m in tax, up from £85.7m in 2013. Mr Bullock warned on not damaging the economy, as "an HMRC investigation can be a very time intensive procedure" and can leave people unsure what they owe.

    06:10: Greek election Radio 5 live

    More from Kerry Craig from JPMorgan on Wake Up to Money. "We are likely to see an extension of 6 months to the bailout agreement" to Greece, he says. "I don't think you'll see the Greek 10 year bonds test the highs we saw.... more and more you aren't seeing the markets price in contagion..." as Italian and Spanish bond yields are also lower than before, indicating less concern among investors, he says.

    06:01: Greek election Radio 5 live
    Alexis Tsipras, leader of the Syriza party and Greece's new Prime Minister

    There'll be a great deal of interest in the Greek election from the markets and Kerry Craig from JPMorgan Asset Management is on Wake Up to Money to talk about them. "The market reaction will be fairly muted" immediately after the election since anti-austerity party Syriza was tipped to win by polls, he says.

    06:00: Howard Mustoe Business reporter

    Good morning. Get in touch via email or twitter @BBCBusiness

    06:00: Matthew West Business Reporter

    Morning everyone. BHS owner Sir Philip Green says he is considering selling the department store chain, the euro has dived after the anti austerity Syriza party won this weekend's snap election in Greece and Aer Lingus is believed to be ready to accept a takeover bid from British Airways owner IAG. We'll bring you reaction to the Greek election result, plus anything else we unearth, as it happens.



Copyright © 2015 BBC. The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.