H. E. Mr. Gints Apals:

If I may respond briefly to the questions raised by members of the joint committee, I will touch upon several issues. The first concerns regulation of financial flows and services. Here, I must state the reasons for the financial crisis in Latvia are very similar to the reasons for the financial crisis in Ireland. As many economists will state these days, the crisis arose because a small economy was overwhelmed by an influx of very cheap money. That also influenced the consumption patterns of people, as well as increasing the real estate and mortgage prices. At a certain point, when the cheap money became more expensive or was no longer available, the crisis began at that moment. This also was a very serious issue for my country. However, I believe the European Union is now taking the right steps to introduce regulation and controls through a banking union and the European institutions are working hard on this issue. From the perspective of Latvia, this would be the right way to address the issues, namely, through regulation at the European level, again because a small nation is subject to big flows of finance. On the other hand, a small nation cannot necessarily put restrictions on or regulate these flows. This should be done by the banking union at a much higher level because through the Single Market and the four freedoms of movement, we are all interconnected.

The second question concerned energy and alternative energy sources. Alternative energy should play a much bigger role in the future because the supply of hydrocarbons is not unlimited. In addition, alternative energy would provide a much cleaner environment. In my country, we are working on these issues using both wind energy and to an even larger extent, the vast resources of wood. Our situation today is not comparable with that which obtained a decade ago. These days, every single piece of wood is utilised. It is not discarded but is utilised to produce heating pellets and everything else. In our region, one could regard wood as processed energy of the sun. We do not use solar panels as much because there is not enough sunshine but we certainly can use wood as a resource for production, heating and everything else. Consequently, alternative energy plays a big role. However, at this point alternative energy still cannot entirely replace traditional sources of energy. There are many discussions, plans and projects in the region, one such project being the construction of a nuclear power plant. There is also the question of building liquefied natural gas, LNG, terminals, which would provide these rather small countries with supplies of LNG coming from abroad and thereby reducing dependence on Russian gas pipelines, which I must note still exists. Interconnection concerning electricity is of course very important. In the case of Latvia, we have interconnection with Sweden, from which we receive electricity produced by hydropower plants and by nuclear power plants.

The next question I wish to address is the working relationship between small nations. Perhaps I did not emphasise sufficiently the fact that small nations become much more influential in European structures. Our influence in European Union decision-making is not entirely proportional to our size but is much bigger. Therefore, we can build alliances, address common issues and use these structures to promote our shared interests. Again, however, the configuration of such alliances differs from case to case depending on one's geographical position or economic situation. There are important fields in which the unanimity rule still prevails and here I will mention the common foreign and security policy, CFSP, and the European security and defence policy, ESDP, in which all countries must agree to a decision, meaning that sovereignty in these important sectors is retained by the nation states.

As for the introduction of the euro, I will comment briefly by repeating that in our view, the euro is not a technocratic project. I have already made reference to the geopolitical considerations that are equally important. One should probably state there are integration processes both in Europe and in Eurasia. From our perspective, introducing the euro would anchor our economy in the European market. That means the introduction of the euro would both facilitate investment and trade with European nations and would tie our economy to the European markets, which is a very important consideration. Moreover, if one considers the issue of financial stability, there have been many pressures to devalue the national currency, which my Government has resisted successfully. Now, the introduction of the euro is certainly a guarantee for financial stability in the future because of course one cannot talk of devaluation of the euro. That would be a global issue and Latvia will be part of the eurozone and then of course will function according to its rules.

On the last question concerning parliamentary co-operation, my country greatly values the parliamentary co-operation between Latvia and Ireland. Already this year, a delegation from the Joint Committee on Foreign Affairs and Trade came to Latvia and I now have been informed that a delegation from this joint committee is visiting my capital city in less than ten days. We greatly value these contacts because European institutions have very broad competences but at the same time, these competences are limited both in a sectoral sense and to a certain number of people who attend meetings in Brussels or who work there. This probably has a slightly wider dimension. It is known that many mass media would raise the issue of the deficits of democracy in the European Union. The way to address this deficit of democracy probably is through involvement of national parliaments and through direct contacts between national parliaments discussing wider European issues. In addition to these contacts, I would also emphasise the importance of people-to-people contacts. The average person or citizen should have much broader contacts with representatives of other European countries and without such foundations, the European Union probably will continue to suffer from the deficit of democracy that is claimed by some observers.