Latvia (10) -- Analyses -- 2009

The Government collapsed

20.02.2009

The country's center-right coalition government collapsed, the second European government, after Iceland, to disintegrate because of the international financial crisis. Prime Minister Ivars Godmanis, who had been in power only since December 2007, resigned but said he would continue to govern until a new coalition was formed. The collapse of the coalition government led some observers to believe that Latvia may see early elections in 2009 -- and with it the risk of a more populist, less financially stringent administration. Farmers, who say they have seen both foreign and domestic markets dry up, blockaded the capital in tractors and forced the resignation of the agriculture minister, Martins Roze. The European Union is an increasingly popular target among farmers. When the three Baltic nations - Latvia, Estonia and Lithuania - joined the European Union in 2004, it helped push their freewheeling economies into overdrive by offering a broader market for goods and making it easier to keep interest rates low. But now the union is often viewed as an overweening bureaucratic structure that pressed Riga to sign off on policies not in the nation's best interests. Farming representatives contend that they are being undercut by low-cost imports from other European Union nations, like Germany, that provide greater assistance to their farmers. The problem, they say, is that the Baltic subsidies were set too low when Latvia entered the union because they were based on average figures from the late 1990s, when market prices were strong. European Union officials say that the opposite is true: The country's agricultural program when it joined the bloc was proposed by Latvian officials. And they say they are working closely with the government to try to extricate the country from its economic difficulties. Timber and livestock are important parts of the Latvian economy. The country was a major industrial center of the former Soviet Union; manufacturing includes machinery, metals, electrical equipment and textiles. Food and dairy processing, distilling and shipbuilding are also major industries. About half of the population are the Letts and the Latgalians, both members of the Baltic language subfamily. About one-third are Russians; there are also Belarussian, Ukrainian, Lithuanian, Polish, and Jewish minorities.

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