Conflicts related to identity politics arose in the period under review which have expanded from their traditional focus on ethnic Latvians versus Russian speakers to a broader debate on liberal versus national-conservative values.

The economy grew at a comparatively brisk rate, largely fuelled by capital investment projects financed by EU cohesion and structural adjustment funds. The Latvian government has failed to address the low rates of spending on research, development and innovation, and also to undertake reforms that would make the higher education sector more competitive.

Corruption and the fact that public officeholders are rarely prosecuted remains one of the major issues in Latvian politics. This has contributed to a widespread populist, anti-elite attitude in Latvia. Much of the public view politicians, civil servants and successful businessmen as corrupt. This has resulted in low levels of mutual trust and social capital, and open distrust of the judicial system.

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