RIGA - Passing a budget is no easy task for a majority coalition. This year, finding the right balance and keeping all parties satisfied and looking good for the upcoming local elections will be particularly difficult.
What's more, it is the first budget for the minority government of Prime Minister Indulis Emsis, and some analysts are predicting a close fight as ministers search for allies outside the coalition to push the budget through.
According to the constitution, if a government fails to pass a budget then it must resign. Therefore, luring allies into the fold may prove expensive, something political commentator Karlis Streips said would result in "horse trading on a level previously unseen."
The budget, which was approved by the government on Sept. 23 and has been sent to Parliament for the first reading on Oct. 7, also carries a high degree of macroeconomic risk since the Latvian economy, set to grow at 7.5 percent this year on robust consumption, could overheat. Inflation is already a problem, and if the government doesn't rein it in, the country could miss its 2008 target for introducing the euro.
The 2005 calls for a deficit of 2 percent 's 160 million lats (238.8 euros) 's and though this is well within the Maastricht criteria for adopting the euro, it entails a huge increase in expenditures 's hundreds of millions of lats 's which in turn could result in higher consumer prices.
Economists, including the IMF, are calling for more caution.
Large increases are planned for a number of different sectors, notably 29 percent for social issues, but these are the kind of discretionary expenditures that win over opposition deputies. Indeed, when the government recently amended the 2004 budget through boosting expenses by 100 million lats, one New Era MP supported the move, claiming the amendments would help her constituents.
To be sure, this draft budget will raise salaries in a number of public positions, though others will remain flat. Anesthesiologists have already promised a strike.
Emsis, a self-confessed optimist, lauded the draft budget, saying "I am sure a better budget than this is impossible to draft. The rest is for the lawmakers to decide."
Some ministers, however, are reportedly grumbling for more money, and the transport and education ministers said they weren't satisfied. But given the fragile nature of the coalition, it is unlikely they will make much of a fuss.
New Era, a fierce critic of the government, has pledged to oppose the bill, but it is doubtful whether the right-wing party will be able to influence other MPs to join the dissent. Valdis Dombrovskis, a New Era MP and former finance minister, criticized the government, saying that the only way to control inflation would be a low budget deficit.
Leftist factions are likely to split on the vote with the National Harmony Party - which just called for a no-confidence vote in the government but lost - voting against or abstaining, and For Human Rights in a United Latvia doing the same.
A vote of abstention, however, will work in favor of the government, since it only needs a majority of votes cast to pass the budget and not a majority of seats (51).