The Latvian parliamentary election 2010
A majority for the ruling coalition government

Added on October 4, 2010 in Riga at 15:12 local time
Prime Minister Dombrovskis was awarded for his tough austerity program, staying on a solid course instead of falling into a populist one. There were discussions going on within Unity to include the oppositional Harmony Centre party with its 29 members of parliament in a new coalition government. But as the Office of the prime minister confirmed to us today, Harmony will only be offered a special cooperation agreement. A first round of talks between the coalition and Harmony took place this morning. As reported yesterday (below), the continuation of the present coalition has been decided. It will consist of Unity, Greens and Farmers (with the shady populist Lembergs) and Fatherland and Freedom, associated during the election campaign with the far-right All For Latvia party [correction at 18:40: All For Latvia will be part of the coalition government]. Prime Minister Dombrovkis said he will ask parliament to confirm the new government on November 2, 2010 the first working day of the newly elected Saeima.

For A Good Latvia (made up of the People's Party and the right-wing Latvia's First Party) with its 8 parliamentarians will not be part of the coalition. The People's Party left the government in March 2010, with four of its ministers quitting (only Minister Dalderis stayed on, leaving his party). Many voters consider the People's Party's leaders the main culprits for the present economic crisis. Some of them represented incompetence and corruption and deserved to be punished at the polls. But as with the crisis in the US, many Latvians were simply living above their means and should also blame themselves.

Article added on October 3, 2010 in Riga at 20:15 local time  
Latvian governments and political parties are unstable. Since Latvia declared its independence from the Soviet Union on August 21, 1991 the country has known fifteen governments and the creation and disappearance of numerous political parties and electoral alliances.

The Harmony Center (Saskanas Centrs) has roots that go way back to the times of Janis Jurkans (check the end of my 2005-interview with the then-president Vike-Freiberga), the first Latvian minister of foreign affairs from 1990 to 1992. It is the only major Russian friendly party; Russians make up some 28% and Belarusians 3.6% of the population of Latvia. But its leader, Jānis Urbanovičs (*1959), is ethnically Latvian. The party considers itself multiethnic, social-democratic, in favor of a  progressive income tax, better relations between Latvians and Russians in Latvia as well as with Russia.

Since July 2009, the Mayor of Riga is from the Harmony Center: the Russian Nils Usakovs or Nil Ushakov (*1976). The Latvian capital with its over 700,000 inhabitants counts for roughly one third of the country's population. This major conquest by Harmony seemed to foreshadow a possible breakthrough in the 2010 parliamentary election. Despite being untainted by the economic disaster - because never part of the government - the Harmony Center finished only second in the 2010 parliamentary election, with 25.7%, roughly 251,000 votes and 29 seats.

The first place in the election belongs to the other major party alliance: Unity (Vienotība). Established on March 6, 2010 this center-right alliance of Prime Minister Valdis Dombrovskis (*1971) and his New Era Party (Jaunais Laiks), the Civic Union and the Society for Other Politics garnered some 30.7%, roughly 300,000 votes and 33 seats.

The New Era Party considers itself a rampant against the oligarchs in the smaller parties, but they already comprised in the ruling coalition. In addition to ministers of the Civic Union,  the For Fatherland and Freedom / LNNK party and the People's Party, the New Era Party had members of the Union of Greens and Farmers (ZZS) accepted in its present five-party coalition government.

The Greens and Farmers Union is largely influenced (if not simply run) by Aivars Lembergs, the Ventspils mayor and businessman who allegedly has used his political status for personal gains. He has been charged with bribery, fraud, corruption and money laundering. But since under his rule, Ventspils has been transformed from a dull Russian oil transit port into a more elegant city, Lembergs can get away with almost anything in his stronghold. In the 2010 parliamentary election, the Union of Greens and Farmers won some 190,000 votes, 19.4% nationwide and 22 seats, establishing the ZZS as Latvia's third largest party. The Unity alliance cannot rule without the ZZS and Lembergs, unless it stretches its hands out to the oppositional Harmony Center. In fact, already today, on Sunday, October 3, Unity and the Greens and Farmers Union have agreed to further cooperate in the 10th Saeima. The continuation of the  present government seems only to be a formality.

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In addition to the three parties and electoral alliances mentioned above, only two other parties managed to win seats in parliament, passing the 5% threshold of the popular vote:

For A Good Latvia (Par Labu Latviju!), initially called AŠ² after its two strongmen, Ainārs Šlesers and Andris Šķēle (the 1998-founder of the People's Party), won 7.55%, some 74,000 votes and 8 seats. The party unites two oligarchs with a shady reputation.

The Party For Fatherland and Freedom, a partner in the current ruling coalition, run together with the ultra-nationalists from All For Latvia (Visu Latvijai!). Together, they won 7.55%, some 74,000 votes and 8 seats.

According to the Central Election Commission, some 934,000 people or 62.2% of all eligible voters went to the polls on October 2, 2010 to elect the 100 parliamentarians to the unicameral Latvian parliament (Saeima).

Prime Minister since March 2009, Valdis Dombrovskis, described as a dour physicists and mathematician, had no choice but to implement a painful austerity program agreed to at the end of 2008 in connection with the 7,5 billion euro rescue package led by the International Monetary Fund (IMF) and the European Union (EU).  The Harmony Center railed against the IMF and the EU, but had not alternative to offer to avoid bankruptcy. Many voters seemed to have realized this.

In 2009, Latvia experienced the EU's deepest recession with a fall of GDP of 18%. In 2010, a stabilization seems in sight with a further fall of “only” 2% of GDP predicted. People had been living on credit for years, fueled by a massive real estate bubble. I met several students who had bought flats in Soviet style tenements at high prices. It was unsustainable. Before the crisis struck, even the tourist magazine Riga in Your Pocket mentioned that Latvians were spending money as if there was no tomorrow.

The financial and economic crisis made the unemployment rate shoot up from 7.5% in 2008 to 17,1% in 2009 and to 20.4% in the first quarter of 2010. In the second quarter of 2010, unemployment fell to 19.4%.

Since the adoption of the bailout in late 2008, the state has cut spending by 14%. Public workers had to accept pay cuts of up to 50%. Taxes had to be raised. Public transport is more expensive. Hospitals and schools had to be closed. Social benefits were reduced. Latvia's second largest bank, Parex Banka, had to be nationalized. The budget deficit, targeted at 8.5% in 2010, will have to be cut to 6% in 2011 and to 3% (the Maastricht criteria) in 2012. The adoption of the euro scheduled in 2014 seems to be a far-away goal. More spending cuts and tax rises lie ahead.

Latvia's other big problem is that the country has no notable export sector. There are no Latvian products competitive on the world market. But Latvia offers advantages: it is part of the EU, with the lowest wages within the EU [correction on October 4, 2010: lowest wages before countries such as Romania and Bulgaria joined the EU, but still among the lowest], but with skilled workers. In short, an interesting place for foreign investments as soon as there are a stable government and a stabilized economy.