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Latvia

Yearbook 2009

Latvia. During the year, the country went through the deepest economic crisis in Europe. In the wake of the global financial crisis, the country's GDP had fallen by 10 percent in the last quarter of last year. Hard cuts with severe social consequences caused the popular anger to boil over in January. Wage cuts and tax increases were heavily criticized by unions and opposition, which organized a protest rally in Riga and demanded parliamentary dissolution and new elections. Ten thousand people attended. After the protest, violent crowds roared, as hundreds of young people tried to storm Parliament, threw bottles and stones, toppled police cars and set fires. It took the police several hours to overcome the riots.

2009 Latvia

According to countryaah, the government was weakened by the rattles, but when it fell in February it was because of internal contradictions. The People's Party and the Greens and Peasants' Union withdrew their support for Prime Minister Ivars Godmanis from Latvia's Road/Latvia's First Party. President Valdis Zatler appointed Valdis Dombrovskis from the opposition party New era as new government leader. Dombrovskis came to lead a five-party coalition with the New Era, the People's Party, the Greens, the Citizens' Union and the Fatherland and freedom.

The new government's main task was to fulfill the terms of the International Monetary Fund (IMF), the EU, Sweden and others for the support loans that would save the state from bankruptcy. Budget cuts hit hard on health care, schools, pensions, child support and public servants' jobs and wages. GDP fell more than 18 percent in the first half of the year, and many Latvians struggled for their daily bread. The government coalition balanced between popular protests and lenders' demands. On several occasions during the year, necessary payments of loans were threatened. After difficult negotiations, the government succeeded in getting ready with this year's budget in June, after the lenders agreed to an increase in the budget deficit from 5 to 10 percent.

During the autumn, the budget for 2010 was equally difficult, with the budget deficit having to be limited to 8.5 per cent. The People's Party revolted against the demands for tax increases and the introduction of property taxes. The government ended up in crisis and was pressured by the lenders' spokesman, Sweden's Finance Minister Anders Borg. The crisis situation forced the People's Party to bow and the budget for 2010 could be taken at the end of the year. But before Christmas, the Constitutional Court declared that the cuts in pensions were contrary to the Constitution. The government must therefore compensate the pensioners and save or include additional large sums in the budget.

Political upheavals followed the economic crisis. The old right-wing oligarchs were blamed for the misery and severely punished in the municipal elections in Riga in June. The election was won by the Social Democratic Harmonic Center, a party dominated by Russian-speaking politicians. Thus, for the first time since independence, Riga got a Russian-speaking mayor. His party was seen as an untested alternative without responsibility for the economic crisis. Even in opinion polls nationally, the Harmonic Center led, while the People's Party was below the threshold. The party elected the oligarch and former Prime Minister Andris Skele as leader in an attempt to retake the initiative. Skele was challenged before the 2010 election by the oligarchs Ainars Slesers and Aivars Lembergs, all accused of corruption. The economic crisis thus seemed to lead politics in an undemocratic direction.

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