Latvian government coalition collapses after a year

Mar 17, 2010, 15:43 GMT

Riga - The Baltic state of Latvia faced political uncertainty Wednesday after the largest party in the ruling five- party coalition announced it was pulling out of government.

The People's Party said it could no longer cooperate with Prime Minister Valdis Dombrovskis of the New Era party after he refused to sign a four-point economic action plan drawn up by People's Party leader and former prime minister Andris Skele.

'We made the decision to leave because the prime minister did not give us a response of any substance to the points we raised,' said Skele after a party meeting.

A statement released shortly afterwards accused Dombrovskis of being 'indecisive' and misleading the public.

The People's Party's serving ministers, which include Foreign Minister Maris Riekstins, would take no further part in government meetings and would tender their resignations, Skele said.

With general elections due on October 2, Dombrovskis and his remaining allies face the prospect of surviving for six months as a minority administration with control of just 47 seats in the 100-seat parliament or Saeima.

Earlier on Wednesday, Dombrovskis released the text of an open letter to People's Party members calling on them to put the good of the country before pre-election jockeying.

He also warned about the possible effects of a party political walk-out on the economy.

'Any contradictions in the government are immediately reflected in the financial markets, and they directly affect the fiscal stability our country...a policy that is truly responsible for the country cannot be self-centred,' Dombrovskis said.

Dombrovskis was installed as prime minister on March 12, 2009 when the government of Ivars Godmanis collapsed after Latvia plunged into the deepest recession in the European Union.

One of Dombrovskis' first acts was to say Latvia was on the verge of bankruptcy, after which he managed to rescue a faltering 7.5- billion-euro (10-billion-dollar) loan package involving money from the European Union, International Monetary Fund, World Bank and regional governments.

In the intervening 12 months, Dombrovskis has successfully negotiated several crucial parliamentary votes to keep Latvia's assistance package on track despite rebellions by the People's Party.

However wage cuts and big reductions in public spending, plus continuing recession mean many Latvians are hard-pressed to make ends meet. The economy contracted by 18 per cent during 2009 and one in five of the working population is unemployed.

Asked on March 11 if he would still be in power at the time of the election, Dombrovskis said the probability was 'more than 50 per cent' and that the public understood his programme of austerity measures was necessary.

The People's Party is keen to promote itself as the party of an economic revival, even though many Latvians regard it as being largely responsible for the recession in the first place.

Even while it was still in government, the party was holding discussions with the opposition LPP/LC party about forming a new 'Business party' that some have already branded the 'Oligarch Party' owing to the involvement of both Skele and former transport minister Ainars Slesers, two of the richest men in the country.