Latvian industrial output down while political tensions rise

Aug 3, 2009, 13:24 GMT

Riga - Latvia's dire economic circumstances were further underscored Monday by official figures showing industrial production down by 18.5 per cent in June from the same month last year.

The most notable decrease was recorded in the transport sector with production of ships and rolling stock collapsing 77 per cent.

Slight bright spots in the picture were an increase of 1.3 per cent in the manufacture of wood products in the heavily-forested European Union member state and the fact that industrial output increased 1.4 per cent from May levels.

The Latvian economy is expected to shrink by at least 18 per cent in 2009 and the government has been forced to ask for a 7.5-billion- euro (10.6-billion-dollar) economic bailout package from the EU, International Monetary Foundation, World Bank and other lenders.

In order to earn the money, the coalition government led by Valdis Dombrovskis is slashing public spending, lowering pensions and attempting to streamline the state apparatus, leading to widespread job losses.

EU statistics office Eurostat said Friday that unemployment reached 17.2 per cent in June, giving Latvia the second-highest rate behind Spain's 18 per cent.

Implementation of the cutbacks is making Dombrovskis' five-party government look increasingly fragile.

Cabinet minister and a former rival for premier's seat, Edgars Zalans, lambasted Dombrovskis on Monday, telling the daily Neatkariga in an interview that it 'isn't nice' for the Prime Minister to criticise his ministers in public and suggesting his People's Party could leave the coalition in the autumn.

As the largest party in government, any such move would likely bring down the current administration, Latvia's twelfth since it regained its independence from the Soviet Union in 1991.