LATVIA TO CONTINUE WITH MINORITY GOVERNMENT AS

UNCLAS RIGA 000246

SIPDIS

SENSITIVE

STATE FOR EUR/NB

SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL LG
SUBJECT: LATVIA TO CONTINUE WITH MINORITY GOVERNMENT AS
LARGEST COALITION PARTY WALKS OUT

SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION.

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SUMMARY
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1. (SBU) Prime Minister Aigars Kalvitis now leads a minority
government. The New Era party, the governing coalition's
largest, left the government April 7 in the culmination of a
three-week government crisis characterized by competing
claims of corruption and government malfeasance. New Era
left the coalition after issuing an ultimatum to PM Kalvitis
demanding the ouster of the First Party, whose leader was
fired as Transport Minister in the wake of a recent vote-
buying scandal. The First Party, New Era claimed, used its
control of Latvia's Interior Ministry to open a retaliatory
criminal investigation against New Era's Economics Minister.
New Era gave up six ministries when it left the coalition,
including the influential Defense, Economics, and Justice
portfolios. The GOL's truncated three-party coalition
commands just 45 seats in the 100-seat Saeima (parliament).
The focus now turns to whether PM Kalvitis can convince
another party to join his government and whether he can rely
on opposition support to confirm nominees to vacated
ministerial posts. End Summary.

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QUESTIONABLE PROBE PROMPTS JL TO LEAVE GOVERNMENT
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2. (U) Prime Minister Kalvitis' (the People's Party) and
President Vike-Freiberga's last-ditch efforts on April 6 to
persuade the New Era party to stay in the coalition failed
April 6, when six New Era ministers quit the government,
leaving in place a three-party minority government
(consisting of the People's Party, the First Party and the
Greens' and Farmers' Union). New Era was angered that a
criminal probe had been launched earlier this week against
its Economics Minister, Krisjanis Karins, over alleged
irregularities in awarding EU structural funds to a company
that had donated money to New Era. New Era claimed the
criminal investigation was political payback on the part of
the First Party for the recent dismissal of Transport
Minister Ainars Slesers, who was implicated in a vote-buying
scandal in the city of Jurmala (a Riga suburb). The Prime
Minister had fired Slesers at the insistence of New Era.


3. (U) New Era April 2 gave the Prime Minister an ultimatum:
either boot the First Party out of the coalition or face New
Era's departure. PM Kalvitis rejected New Era's demand,
urging all factions to continue working in the government.
New Era leader Einars Repse, however, called the criminal
probe an abuse of power by the First Party "for which the
First Party should bear responsibility." In the end, the
sides could not be reconciled, and Repse announced the
evening of April 6 that it was quitting the government.

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GOVERNMENT LIMPS ON, PM LOOKS TO BRING IN RIGHT-WING PARTY
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4. (SBU) Even though New Era's departure is a serious blow
to the government's stability, most political pundits
believe that Prime Minister Kalvitis can manage to muster
the necessary opposition support to carry on with a minority
government, as well as confirm rather quickly what are now
seven vacant ministerial jobs (the Transport Minister's
post, which was left empty by Slesers' ouster, and the six
New Era portfolios vacated yesterday). The nationalist
opposition party Fatherland and Freedom/LNNK (7 seats in the
Saeima) and two out of three independents could provide
Kalvitis with the support to limp on. In an April 5 meeting
with Ambassador Bailey, Kalvitis suggested that he already
had agreement from Fatherland and Freedom to join his
government if New Era left, but there have been no official
announcement of this yet.

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COALITION DIVYING UP MINISTRY POSITIONS
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5. (SBU) The three coalition parties have already begun
consultations on how to divide the cabinet portfolios. Left
vacant by New Era's departure are the Defense, Economics,
Justice, Education, Social Integration and e-Government
Ministries. No successors to these have officially been put
forward yet yet, though Kalvitis suggested to Ambassador
Bailey April 5 that Karins' successor in the Economics

Ministry could be current PM economic advisor Aigars
Stockenbergs, and Embassy contacts in the Saeima are
pointing to People's Party Chairman Atis Slakteris as the
most likely candidate to become the next Defense Minister.
[NOTE: Slakteris was Defense Minister in the government of
Indulis Emsis in 2004. End Note.] According to several
parliamentary sources, a special session of parliament might
be called as early as this weekend to hold a confirmation
vote for new ministers.

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COMMENT
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6 (SBU). There is also much speculation as to what really
prompted New Era to leave the government. Some analysts
suggest that New Era, the most popular party in the latest
opinion polls, hoped to gain itself maximum room for
maneuver in reading for the October 2006 Saeima
(parliamentary) elections. Now outside the government, New
Era can criticize "corrupt" political opponents freely.
Regardless of motives and timing, Ambassador Bailey this
week pointed out to both PM Kalvitis and Repse that they
need to remember that they are playing to more than a
domestic audience. Latvia's leaders, cautioned Ambassador
Bailey, need to remember that their actions are being
scrutinized by many outside Latvia, including Allies and
business partners, and that these groups are looking for
leadership, accountability, and the ability to govern as
Latvia takes on high profile events this year like an
approaching trade and investment conference targeted at U.S.
companies, not to mention the NATO Summit. End Comment.
BAILEY