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Is The Georgian Government Living On Borrowed Time?

Georgian Dream founder Bidzina Ivanishvili
Georgian Dream founder Bidzina Ivanishvili

Two recent developments have highlighted the erosion of popular support in recent months for Georgia’s ruling Georgian Dream coalition. But no rival political force currently appears strong enough to capitalize on that popular disillusion.

On March 21, the opposition United National Movement (ENM) of former President Mikheil Saakashvili convened a demonstration in Tbilisi to demand that the government resign for its handling of the economy. Attendance was at least 10,000, and possibly as many as 30,000 people from across the country -- far more than the organizers anticipated, according to ENM law-maker Sergo Ratiani.

Just days later, the findings of an opinion poll conducted in late February commissioned by the International Republican Institute showed support for the ruling Georgian Dream coalition at 36 percent, followed by the ENM with 14 percent and the Free Democrats headed by former Defense Minister Irakli Alasania with 10 percent. In the June 2014 local elections, Georgian Dream garnered 50.8 percent of the vote.

Of the total 1,500 respondents, 55 percent opined that Georgia is “moving in the wrong direction,” up from 33 percent in February 2014. Just 25 percent considered the country is moving in the right direction, compared with 48 percent one year earlier.

Analyst Giorgi Kalatozishvili has attributed the decline in support for Georgian Dream to a combination of two factors.

One is what he terms “the psychology of post-Soviet Georgian society, which is predisposed to demand from the authorities consolidation and a clear and precise program, confidence in their own abilities and the ability to respond appropriately to challenges.”

The second is the decline in value of the Georgian lari over the past four months. That process began in November, when the lari fell by 11-12 percent against the U.S. dollar. National Bank President Giorgi Kadagidze and Prime Minister Irakli Gharibashvili both attributed that development to the strengthening of the U.S. dollar and a fall in external funding, the combined effect of which, they said, had been exacerbated by “panic” and “over-reaction” among the population at large. The currency then stabilized, but the downward trend resumed in January.

On February 19, the lari fell to 2.1472:US$1, compared with 1.7675:US$1 three months earlier, the lowest rate since January 2004. One week later, on February 26, it was trading at 2.2494:US$1, a decline of 28.2 percent in three months. Over the next 10 days, the lari rose slightly to 2.1:$US1, but by March 19 it had again fallen to 2.23:US$1.

Meanwhile, exports fell by 26 percent in January-February compared with 2014, and remittances by 22.4 percent. Caucasus Press quoted the World Bank as estimating the dependence of the Georgian economy on remittances at 12 percent. As of March 13, annual inflation was already 23 percent.

The financial impact of those trends was exacerbated by the spectacular lack of unity within the Georgian leadership. Georgian Dream founder and former Prime Minister Bidzina Ivanishvili, a billionaire philanthropist who some observers believe continues to pull strings behind the scenes, laid the blame for the “crisis” squarely on the National Bank.

National Bank Chairman Kadagidze rejected that criticism as “slanderous,” arguing that “attempts to shift the blame” had weakened both the lari and the economy in general. At the same time, he distanced himself from the cabinet and implicitly criticized it, pointing out that the National Bank “cannot answer for the country’s economic policy.”

Kadagidze further expressed surprise at the timing of Ivanishvili’s statement, made public on February 26 when the lari was already stabilizing. Azim Sadykov, who heads International Monetary Fund’s mission in Georgia, was similarly quoted as dismissing Ivanishvili’s criticism of the National Bank.

Prime Minister Gharibashvili acknowledged in late February that the “very difficult situation” could necessitate revising downwards the 5 percent GDP growth target for 2015. At the same time, he said the cabinet was working with the National Bank on “improving the situation very quickly” and attracting investment. Those statements failed, however, to convince the ENM, which together with the extra-parliamentary Labor Party had demanded in early February the resignation of the economy and finance ministers.

President Giorgi Margvelashvili, who is at odds with Gharibashvili, initially rejected a subsequent demand by the ENM to convene a special session of parliament to discuss the economic situation. Meeting on February 25 with the ministers of economy and finance, Giorgi Kvirikashvili and Nodar Khaduri, Margvelashvili said it was reasonable to give the government until March 5 to draft its plans for stabilizing the currency.

When the government failed to meet that deadline, the ENM again called on Margvelashvili to convene an emergency parliament session, which he duly did for March 13. That session failed to take place, however, because only 41 law-makers showed up; a minimum of 76 (of the total 150) is required for a quorum.

Kvirikashvili, Khaduri, and Kadagidze nonetheless outlined at a five-hour session of the parliamentary committees for finance and the economy on March 12 the “revolutionary” (Khaduri’s choice of adjective) measures the government envisages for restoring economic stability. According to Kvirikashvili, they include raising $300 million-$350 million over the next few months by privatizing state-owned enterprises and enacting measures to improve the business climate, including abolishing corporate income tax on reinvested profits.

At the same time, Khaduri stressed that the government will not raise taxes, although it may increase excise duty on alcohol and cigarettes.

Prominent ENM members told participants at the March 21 demonstration that the party plans to stage further protest rallies across the country, expose corrupt regional officials, and seek to initiate a parliament vote of no-confidence in Gharibashvili’s government.

At first glance, the ENM’s chances of forcing such a vote appear minimal. The ENM currently has 50 parliament mandates, the seven factions aligned in Georgian Dream – 87, and the Free Democrats – eight. Four law-makers are not members of any faction. One parliament seat is vacant.

A minimum of 60 votes (two-fifths of the 150 parliamentarians) is required to request a no-confidence vote, and 75 votes for it to pass. In that case, the parliament is required to approve by a minimum of 60 votes a candidate for prime minister, whom the president must endorse within five days. If the president vetoes the proposed candidate, the parliament is empowered to nominate him again, but a minimum of 90 votes are needed to do so, in which case the president must endorse the candidate. If, however, parliament fails to overcome the presidential veto, the president has the right to dissolve parliament and schedule pre-term elections.

Free Democrats leader Alasania, whom Gharibashvili dismissed as defense minister last November following a public row over the arrest of several ministry staffers, has already announced that his faction will not support a no-confidence vote. But even before the March 21 protest, analyst Mamuka Areshidze warned that the ENM was actively seeking to suborn at least 15 Georgian Dream law-makers.

The IRI opinion poll results suggest that in the event of a pre-term election, no party would gain a majority. And just days before the March 21 demonstration, several observers expressed doubts that the ENM would succeed in mobilizing a large number of protesters. The Caucasus Knot quoted NGO head Khatuna Lagazidze as explaining that “popular dissatisfaction is increasing by the day, but there isn’t any opposition force in the country that could mobilize voters, and for that reason the incumbent government feels more than confident."

One participant in the March 21 protest told the same website, however, that “in Kutaisi the number of active supporters of Mikheil Saakashvili has risen from 2,000 to 10,000, people want the country to develop.” Whether the ENM is enjoying a similar upsurge in popularity nation-wide, and whether the unexpectedly high attendance at the Tbilisi protest will serve as a catalyst for the party’s resurgence, is difficult to predict, however.

Assuming that Georgian Dream succeeds in averting a no-confidence vote, the question arises: can the government provide not just economic stability but genuine growth in the 18 months between now and the parliamentary ballot due in the fall of 2016?

Kadagidze told the parliament committee joint session on March 12 he thinks further turbulence on the currency market is unlikely. But Khaduri has confirmed that this year’s target for GDP growth will indeed be revised downwards from 5 percent to 2 percent, as Gharibashvili had hinted it might. From that point of view, the March 21 protest may in hindsight come to be seen as the de facto start of the parliamentary election campaign, with the ENM and Alasania’s Free Democrats in competition to win the favor of an electorate alienated by Georgian Dream’s lack of unity and failure to deliver on its 2012 election promises.

-- Liz Fuller

About This Blog

This blog presents analyst Liz Fuller's personal take on events in the region, following on from her work in the "RFE/RL Caucasus Report." It also aims, to borrow a metaphor from Tom de Waal, to act as a smoke detector, focusing attention on potential conflict situations and crises throughout the region. The views are the author's own and do not represent those of RFE/RL.


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