MANDATE APPROVED: The opposition joined the coalition giving the government the right to negotiate with international lenders.
RIGA - Nothing but the support of several opposition lawmakers helped the Latvian government avoid an international scandal, unrest in the financial markets, and delay of the next tranche of international loans. The biggest coalition member, the People’s Party, refused to vote for the mandate giving the Cabinet the authority to deal with the international lenders. There is a great risk that due to the parliamentary elections, which take place this October, such a demarche could happen again.
The Latvian government has negotiated with the International Monetary Fund, the European Commission and other lenders since December 2008 without such a mandate. However, this year both the Constitutional Court of Latvia and the Ministry of Justice stated that this was barely legal, as Latvia is a parliamentary democracy, therefore the Cabinet has to have full powers from the parliament to keep dealing with the donors.
Several days before the vote in parliament, the People’s Party stated that there was no way to support the mandate because it did not give enough rights to the parliament. They prepared another version of the mandate, which Prime Minister Valdis Dombrovskis (New Era) considered to be inappropriate
“The People’s Party version may lead us to a dead-end in negotiations with the international lenders. It includes stipulations which are impossible to fulfill. They are acting unconstructively,” said Dombrovskis at a news conference.
People’s Party leaders insisted they only wanted the observation of the Constitution: “We do not want to topple the government. We are just debating,” said Vents Armand Krauklis, vice-chairman of the party’s faction in the parliament.
However, six members of the parliament in the opposition Latvia’s First Party/Latvian Way decided to support the coalition and voted for the mandate. “If the parliament would not have supported the mandate the prime minister would not have the right to sign the agreements with the IMF and the EC [which is necessary to receive the next tranches],” said Gunar Kusins, head of the parliament’s legal department.
Yet, every man has his price and now opposition MP’s are eager to get into the coalition. “The negotiations with the opposition lasted for two days and were extremely tough. We promised to consult them and to share some important documents from now on. Also, if the People’s Party keeps carrying itself in such a manner, we may replace them in the government with Latvia’s First Party/Latvian Way. The People’s Party is likely to continue striking a blow against us and we cannot take such a risk,” a New Era member told The Baltic Times.
In some way such a move could be sensible, because otherwise there may be no happy end if this happens again. “This means the start of the election campaign. It is obvious the People’s Party desperately needs to create a better profile for themselves. My feeling is that they are trying everything in order to distance themselves from the existing coalition. It is a little bit sad to see, I must say. We still have nine months till the elections and many interesting things will happen,” said Morten Hansen, Head of Economics Department of Stockholm School of Economics in Riga.
When asked about possible reactions from abroad, Hansen said: “On the one hand, we can say that the agreement with IMF and EU still exists. I am sure that many people will look at it and say that it is quite remarkable that Latvia is still holding up. There was no default or currency devaluation.”
He continues that “On the other hand, whenever there is no agreement in the government, people will look from abroad and say: ‘What are the Latvians thinking about?’ And the markets in London, in Stockholm, etc., will be a little bit shaky. The best thing to calm the financial markets down is to stick to the plan. Unfortunately, domestic election campaigns get in the way of that.”
However, this time Latvia managed to get out of the woods and the international lenders showed no sign of dissatisfaction. “The mandate issue to conduct negotiations with the international lenders, as well as the content of the economic stabilization and development plan, is in the Latvian government’s capacity. The EC relies on its partners to secure the raising of the loan according to the national legislation,” said Iveta Sulca, Head of the EC’s office in Latvia.