Latvian PM may keep job after vote

Latvian Prime Minister Valdis Dombrovskis may retain his position after a parliamentary vote tomorrow, leaving a nationalist party and one aimed at the country’s Russian population jostling for a coalition spot.While Dombrovskis’s Unity bloc is second in polls, it may join forces with former President Valdis Zatlers’ Reform party, ranked third, in a coalition that would surpass support for first-placed Harmony Center, which targets Russian speakersThe snap election is the result of a referendum called by Zatlers after corruption probes into lawmakers. A tie-up with the prime minister would probably require a third partner, pitting Harmony, which opposes Dombrovskis’s main policies, against the nationalist All for Latvia/For Fatherland party, whose economic agenda is closer to that of the premier.“Zatlers’ Reform Party and Unity will very quickly form a bloc that will be at the heart of any future government,” Daunis Auers, a political scientist at the University of Latvia in the capital, Riga, said by phone Sept. 14. “I should imagine they will get behind Dombrovskis.”Harmony is backed by 20.3 percent of voters, according to a Sept. 8-9 poll by Latvijas Fakti and commissioned by Baltic News Service. Dombrovskis’s Unity party has 13.6 percent, Zatlers’ Reform party has 11.4 percent and the All for Latvia/For Fatherland party has 6.9 percent. Still, about a third of voters are undecided, meaning a surprise is possible. The poll didn’t give a margin of error.Latvia’s parliament was dismissed July 23 after 95 percent of voters backed Zatlers’s call for new elections. The former president sought the referendum after the legislature failed to lift the immunity of a member facing a criminal probe, sparking an anti-corruption protest in Riga.Lawmakers later rejected Zatlers’s bid for re-election, prompting him to form his own party. He has ruled out cooperating with the Greens and Farmers Union, whose prime ministerial candidate is on trial for money laundering, a charge he denies. Zatlers’s party has 8.4 percent support.Latvian five-year credit-default swaps, used to speculate on a borrower’s credit worthiness, rose to 276.6 basis points on Sept. 14, compared with 214.5 the day before parliament was dissolved, according to CMA Datavision prices.The Greens and Farmers’s popularity declined as Latvians blamed them for a recession in which output fell more than a quarter, unemployment quadrupled, wages shrank and the government got a 7.5 billion-euro ($10.4 billion) bailout loan. Dombrovskis, who came to power in March 2009, passed tax increases and spending cuts equal to 16 percent of gross domestic product to stabilize the budget and meet the bailout terms.GDP increased 5.6 percent from a year earlier in the second quarter, the quickest in 3 1/2 years, as manufacturing and exports grew. Dombrovskis’s plans, should he win re-election, include further austerity as part of efforts to swap the lats for the euro in 2014.Harmony, which is vying to become the first Russian- oriented party since Latvia regained independence from the Soviet Union in the 1990s to join government, opposes those policies, advocating a slower approach toward euro adoption and higher social spending.The All for Latvia/For Fatherland party, whose nationalist agenda includes increasing the number of classes taught in Latvian in minority schools, backs trimming the budget deficit to less than 3 percent and joining the euro in 2014.Polls suggest there is still plenty to play for, with almost 29 percent of Latvians still undecided. Still, President Andris Berzins, who must decide who will form the next government, may favor Dombrovskis’s policies.“Berzins has talked about the importance of fiscal discipline in order to facilitate the adoption of the euro,” Eurasia Group analyst Mujtaba Rahman wrote yesterday in a note. “He has also reminded politicians that all promises to increase social expenses will face budgetary limits.”