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Latvian ruling coalition falls, PM resigns
Fri Feb 20, 2009 11:41am EST
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By Patrick Lannin
RIGA (Reuters) - Latvia's four-party ruling coalition collapsed on Friday, prompting the president to call for talks to forge a new government to tackle a deepening economic crisis.
The coalition's fall, the second European government to succumb to the financial crisis, adds to the economic problems of the small Baltic state, which last year had to take a 7.5 billion euro ($9.43 billion) IMF-led rescue loan last year.
Political and social tensions exploded in January into a riot, though there has been little sign of a repeat.
"On Monday I will start consultations with all the political parties in parliament ... on the formation of a new government," President Valdis Zatlers told reporters after accepting the resignation of Prime Minister Ivars Godmanis, in office since December 2007.
The country of 2.3 million people, a European Union and NATO member since 2004, has had a history of revolving door politics since it quit the Soviet Union in 1991, with the same parties swapping in and out of coalition governments.
The largest ruling parties, the People's Party and the Union of Greens and Farmers, said they had lost confidence in Godmanis, who is from another party, forcing him to quit.
One opposition party said the move was aimed at eventually giving the People's Party a tighter grip on power, and possibly the prime minister's job, ahead of municipal elections in June.
The government is also due to make further budget cuts due to the deep slowdown after an austerity plan launched under the deal to win the IMF and EU bail out. The economy is set to drop 12 percent this year, the Finance Ministry has forecast.
Latvia's central bank urged politicians to ensure they stuck to the deal and said the new team should be in place in a week.
"Most politicians want control of government, even in the worst of times," said Krisjanis Karins of the opposition New Era party. Recent polls have shown opposition parties will win an election, but that trust in parliament is also low.
"This government fell for two reasons: one, because of its inability to act and get things done, and secondly because parties want to position themselves better before municipal elections this year," said political commentator Karlis Streips.
Karins said a new election would be the best way to boost public confidence. One analyst agreed this was possible.
"It is possible they will be able to work out a new coalition but I think what it really means is new elections," said Danske emerging markets research head Lars Christensen.
"There will only be one issue at stake and that will be the austerity measures and the IMF deal. It is possible that means some parties may look to move away from the IMF deal, which would be very bad news for the Latvian economy." Continued...
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