Lawmakers back new government for crisis-hit Latvia

Riga — Latvian lawmakers Thursday voted in a new government for the politically unstable, recession-hit Baltic state, backing a coalition formed by centre-right leader Valdis Dombrovskis.

Sixty-seven members of parliament backed a motion of confidence in Dombrovskis’ new administration, while 21 voted against.

Dombrovskis, 37, who is Latvia’s 15th premier since independence from the Soviet bloc in 1991, will have to confront the deepest slump in the European Union.

Latvia, which joined the EU in 2004, had boomed in recent years, with domestic demand bolstered by rising wages and easy credit. But rampant inflation and the global crisis took their toll last year and the economy is expected to contract 12.0 percent across 2009.

Dombrovskis has warned Latvia risks bankruptcy — which would send economic shockwaves across the Baltic and Eastern Europe — and must step up talks with the International Monetary Fund and other lenders who last December agreed to bail Riga out.

Under the 7.5-billion-euro (9.5-billion-dollar) aid deal, the government has to rein in public spending to bridge a yawning public deficit but Dombrovskis has said he needs leeway.

His coalition allies have agreed austerity measures to pin the deficit at 7.0 percent of gross domestic product, instead of the 5.3 percent set in the bailout.

Belt-tightening started by the previous government, including state sector pay cuts and hikes in value-added tax, has sparked public anger. Coupled with long-standing distrust in Latvia’s politicians, the cuts fuelled rioting in Riga in January.

President Valdis Zatlers tapped Dombrovskis as prime minister, citing his solid economic and international experience, after the government of Ivars Godmanis collapsed on February 20.

Dombrovskis, currently a member of the European Parliament, was finance minister in 2002 to 2004 and was previously the Latvian central bank’s chief economist.

Godmanis, 57, had been office since December 2007. He quit amid mounting public discontent over the economy as well as a rebellion within his centre-right coalition as its four parties jockeyed ahead of elections later this year.

Dombrovskis forged a five-party coalition with 63 seats in the 100-member parliament, giving it more clout than Godmanis’ government, which had 55.

Analysts have described the incoming coalition as a "loveless marriage" due to long-standing personality clashes and thinly-disguised differences during coalition talks.

Dombrovskis’ own party, New Era, is also on the centre-right but was in opposition.

His allies are the former opposition Civic Union, and the People’s Party, Union of Greens and Farmers and the Union For Fatherland and Freedom, which were all in the defunct government.

Godmanis’ Latvia’s First/Latvia’s Way party refused to join the new coalition.

Aleks Tapinsh/AFP/Expatica