Latvians to Vote on Breaking Oligarchs, Euro Path

By Mia Shanley and Nerijus Adomaitis (September 15, 2011)

Latvians vote in an election on Saturday called to break the influence of oligarch businessmen which will also determine if the nation moves closer to adopting the euro, but may give power to a party usually backed by the Russian-speaking minority.

Opinion polls show the snap vote, the second election in less than a year, will be won by Harmony Center which has portrayed itself as the only center-left party that would boost social spending after tough austerity and delay euro zone entry.

Harmony is trying move beyond its Russian-speaking base to attract support across the ethnic divide. But suspicions of Moscow’s influence and differences with potential coalition partners over economic policy may stop it entering government for the first time since independence from the Soviet Union.

Analysts say current Prime Minister Valdis Dombrovskis and a party formed by ex-President Valdis Zatlers, who forced the election in anger at the oligarchs, could form the core of a new government, but not win a majority of parliament’s 100 seats.

“We have only one requirement: no coalitions with oligarchs’ parties,” Zatlers told Reuters in a recent interview.

Critics say oligarchs have used their wealth to influence Latvian politics and favor their own business interests or those of their associates. Three politically-influential businessmen at the centre of the row have denied any wrongdoing.

Zatlers forced the election by ordering parliament be dissolved after lawmakers refused permission for prosecutors to search a flat owned by a businessmen and member of parliament.

Latvians overwhelmingly backed his decision in a July referendum. By then Zatlers had failed to be re-elected as president by parliament, and he formed his own party.

Opinion polls have shown Harmony Centre leading the race, with Dombrovksis’s Unity party and Zatlers’s Reform Party vying for second place.

Dombrovskis, 40, led Latvia through a harsh package of public sector pay cuts and higher taxes after a 2008 crisis and a 7.5 billion euro international bailout. However, his Unity party won the last election in October 2010 with 33 seats.

He is campaigning on a platform of further fiscal tightness to help Latvia adopt the euro in 2014, policies Zatlers backs for the country, which regained its independence from the Soviet Union in 1991 and joined the European Union and NATO in 2004.

Dombrovskis says his policies have restored international confidence in Latvia and brought about the current recovery from a stunning 18 percent drop in economic output in 2009.