Recent political attention in Latvia has been sharply divided between the government of Prime Minister Valdis Dombrovskis desperately trying to pull Latvia out of its financial mess with the aid of the International Monetary Fund, and new political developments particularly centred around the Rīga City Council election.

The European Parliament elections, held on the same day as municipal elections, also testified to significant new political shifts—not all of them positive for Latvia.

The results of the June 6 municipal elections saw an unprecedented change of power in Rīga. With glamour boy Nils Ušakovs as leader, Harmony Centre (Saskaņas centrs, or SC) swept to victory, gaining 26 of the 60 seats on the city council. Remarkably for Latvia’s usually highly fragmented election results, only three other parties gained seats by crossing the 5 percent vote threshold: Ainārs Šlesers’ First Party of Latvia (Latvijas Pirmā partija, LPP) gained 12 seats, Prime Minister Dombrovskis’ New Era (Jaunais laiks, JL) got 8 seats, and Sandra Kalniete’s and Valdis Kristovskis’ relatively new Civic Union (Pilsoniskā savienība, PS) had a strong performance and earned 14 seats. Effectively, all of the coalition parties that previously held power were expunged in a stunning turnaround, and two former leading parties, People’s Party (Tautas partija, TP) and the Union of Greens and Farmers (Zaļo un zemnieku savienība), gained less than 2 percent of the vote.

An immediate coalition formed between the SC and LPP, with a friendly political business agreement that Ušakovs will be mayor, while the ever-opportunistic Šlesers gained a sinecure as vice mayor and—more lucrativley—as head of the Rīga Port Authority (Rīgas Osta), an organisation whose finances and operations have been shrouded in secrecy, making murky agreements with cargo shipping companies but failing to support a single sustained passenger ferry service between Rīga and any port in the Baltic.

The strength of SC support, and the survival and even growth of the often scandal-ridden LPP, brings ominous portents for Latvia’s future. Clearly, the Rīga elections are just one stage in a desire ultimately by these parties to control the Saeima (Parliament) at next year’s scheduled national elections.

Reactions have been mixed. Some observers have seen it as a sign of growing Russian influence, others as signs of corruption shifting from the national level (where it seems there is little left to steal) to Rīga with its many assets. For others, however, this election has represented a clearing of the air. Instead of constantly shifting coalitions between many parties and unclear responsibilities for decisions, as characterised by the previous city council, it is now clear who will be responsible for anything that happens in Rīga—for good or bad. The SC, which has always been in opposition at national and Rīga levels, will now be tested, and the activities of the LPP will also be now more apparent.

Meanwhile, the elections for the European Parliament delivered a more mixed result, which reminds us once more that Rīga is not all of Latvia. The eight Europarliament deputies were divided among SC (2), PS (2—another strong showing for this new party) and one each to other parties. Two-time former Prime Minister Ivars Godmanis gained a place for the LPP in alliance with Latvian Way (Latvijas ceļš). JL’s deputy is the former Latvian-American Krišjānis Kariņš. The beleaguered For Fatherland and Freedom (Tēvzemei un brīvībai / LNNK) returned its former deputy Roberts Zīle, as did the Moscow-leaning For Human Rights in United Latvia (Par cilvēka tiesībām vienotā Latvijā), whose veteran Soviet imperialist Tatjana Ždanoka retained her place. The last two barely passed the 5 percent barrier to election.

On the Rīga City Council, SC lost no time in making the improved status of the Russian language an early objective. Various hints of allowing more Russian language use in public administration (againt the current state language law) are early indicators of what is likely to be a renewed long-term battle. Of immediate concern, however, has been Ušakov’s move to shut down the non-Russian and non-Latvian schools and have them join the Russian stream.

Since regained independence, Latvia has encouraged the non-Russian communities to develop their own schools. In about a dozen schools the language of instruction is Lithuanian, Ukrainian, Estonian, Polish or other minority language.

This move comes because of the significant decline of numbers in Russian schools in Rīga. For example, in 1990-1991, there were some 33,100 students in Latvian schools in Rīga, dwarfed by the 67,000 in Russian schools. However, Rīga has seen a radical dwindling of numbers in Russian-stream schools, so that in 2008-2009 there were 33,700 Russian students, now slighly overshadowed by those in Latvian-stream schools, 34,600. Yet there has not been a proportional closing down of Russian schools, with only a few closures or mergers.

The desire to close all non-Russian and non-Latvian schools and join them to Russian-stream schools is one more attempt—sustained now for two decades—to count all non-Latvians as “Russian speakers.” In fact the smaller nationalisties do not see themselves at all as part of the Russian mass, and will resist this move strongly.

Meanwhile, against the backdrop of these political innovations, the Dombrovskis government has pursued intense talks with the International Monetary Fund over loans, a process made increasingly difficult by the IMF insistence on massive budget cuts (around LVL 800 million), and by rapidly declining revenue as the economy contracts. Dombrovskis’ work has not been helped by often disorienting statements from coalition partner TP, which has threatened to cut off the talks if further budget cuts are envisaged, only to back off from this threat at the last minute.

At the same time, it should be said that the IMF has taken a perhaps extraordinary hard line on Latvia, insisting on massive budget reductions when quite clearly the government has no option but to cut into sensitive areas such as health, education and pensions. One cut in pensions has already been agreed on, teachers will work on reduced salaries, and the first hospitals are being closed or merged. The IMF hard line has also made it impossible for the government to engage in any stimulus package, an option many governments around the world have taken, with some apparent success.

If the harsh cuts are made the IMF will lend Latvia enough money to stabilise its financial system, restore its credit rating and introduce needed sructural reforms. Also, Latvia can only become part of the eurozone if it maintains a low budget deficit—and that salvation is something the government still sees as its ultimate aim, not knowing how the electorate will respond to its present efforts at next year’s elections.

Since Latvia’s new government came into office two months ago, the atmosphere of Latvian politics has changed almost beyond recognition. When President Valdis Zatlers picked Valdis Dombrovskis to be prime minister, a sequence of events began that now show us a government facing up to the realities both of the catastrophic financial crisis engulfing Latvia, and of the need to change a political culture of corruption and self serving.

Dombrovskis is from the New Era Party (Jaunais laiks, or JL), which stood outside the previous coalition, but he quickly stitched together a coalition that has been remarkably trouble free. Paradoxically, the situation made it easier to form a government, in that all the former coaliton parties were keen to do so quickly, or face a possible early Saeima election. Dombrovskis was also able to sideline a mortal enemy of JL. Ainārs Šlesers’ First Party of Latvia (Latvijas Pirmā partija, or LPP) was not accepted into the coalition, leaving it and the two Russian-oriented parties in opposition. To show he does not give a damn, strongman Šlesers himself is now a candidate for the mayor of Rīga, another source of potential kickbacks now that his political businesses in the national government (transport, communications, infrastructure) are no longer accessible. The former coalition-leading People’s Party (Tautas partija), the Union of Greens and Farmers (Zaļo un Zemnieku savienība) as well as the much bruised and discredited For Fatherland and Freedom (Tēvzemei un brīvībai / LNNK) make up the coalition together with JL.

Overshadowing the politics is the daunting economic situation, with Latvia needing to borrow several billion euros from the International Monetary Fund but needing to bring in severe cutbacks in spending. Budget cuts of just under LVL 1 billion (EUR 1.4 billion) will reduce the deficit to an acceptable level. Latvia must be able to eventually bring its budget deficit down to 3 percent of gross domestic product to qualify for acceptance into the euro zone. This time around it is intent on limiting the budget to a 7 percent deficit, fearful that revenue decline will even make this hard to achieve.

Dombrovskis gained his credentials as a Europarliamentarian, with a penchant for economic and infrastructure issues. His team includes the extraodinary return of a previous superstar, Einars Repše, who was the celebrated director of the Bank of Latvia that maintained the currency despite all adversity, then the ill-fated self-directed prime minister of the first JL government, and then a petulant isolate. Now Repše is back in the hot seat as finance minister, and seems to have regained much of his financial credentials. He and the government are in an almost impossible situation: given falling revenues, cuts to government spending must now approach some 40 percent. The government has indicated there will be protected core areas: health, education, internal affairs (including fighting corruption) and justice, but even they must restructure many of their activities. And “protected” is a very relative term: both teachers and health workers are facing salary cuts.

One other area that has already been cut savagely was the raft of committees, councils, advisory panels, secretariats and boards of dozens of enterprises and semi-government institutions where representatives—almost all with close links to one or other former coalition parties—gained enormous salaries for little work. These sinecures have been almost totally abolished. There is an ongoing reduction of numbers in all government departments. More worryingly, both the state-owned TV and radio face massive cuts. There are concerns over their maintianing programming standards and questions have been raised even about their viability. Other state-owned institutons of national importance, including libraries, also face uncertain futures.

Under this barrage of financial woe a remarkable scene is unfolding of ministers relatively rarely openly squabbling, and even those who despised JL and kept it out of previous coalitions have had to put their heads down and follow Dombrovskis and Repše into financial responsibility. While it is certain that drastic cuts in the upcoming budget will be unpopular, ministers of all parties are caught in a bind: Each wants to fight for their area of responsibility, but each knows that if IMF requirements are not met, the country will be in even greater financial chaos, and they will be blamed.

The first test of the new political order will soon be upon us with local government and European Parliament elections on June 6. Here other, more traditional, political issues are to the fore. Both elections will be a test to see what support the former coalition parties still have in the electorate. The People’s Party has been down to less than 2 percent popularity in some recent opinion polls, and although it holds power in many local government areas it could be in for a shellacking. For Fatherland and Freedom may share a similar fate, and even the traditional Union of Farmers and Greens has struggled to gain 5 percent support. JL is now the leading party, according to opinion polls, alongside the Russian-oriented Harmony Centre (Saskaņas centrs, or SC).

Yet it will be the Europarliament elections that will generate most heat, and there the SC is at the heart of the issue. The SC is a peculiar organisation. At the last Saeima elections it had considerable success in vastly outpolling the other traditional hardline Russia-leaning party, For Human Rights in United Latvia (Par cilvēktiesībām vienotā Latvijā, or PCTVL). SC consists of three factions. Two are moderate, gaining most of their votes for Russians who are Latvian citizens, but gaining some support among Latvians as well. Their very presentable leader, Nīls Ušakovs, is running for mayor of Rīga in the local government elections. Many Latvians indeed would prefer him to Šlesers, the other celebrity candidate. Ušakovs’ faction runs a moderate line on ethnic and national issues.

The third faction is headed by the notorious Alfreds Rubiks—former mayor of Rīga, Communist Party first secretary and unreconstructed pro-Moscow advocate—who was jailed in 1991 for six years because of his treason against the new Latvian state. Detesting the very existence of the Latvian state, he has worked hard to align himself with the SC instead of the PCTVL.

Now Rubiks is the No. 1 candidate for the SC in the European Parliament elections. Having a possible Latvian representative of this calibre in the EP has shocked many. It also raises questions about the “moderate” credentials of the SC. Was it really a put-up piece of political craftsmanship to assume a moderate face while still harbouring anti-Latvian and pro-Moscow policies? Although voters have the option of crossing off names and even many SC voters may balk at electing this troglodyte figure, there is a chance Rubiks may become one of Latvia’s Europarliament deputies. If PCTVL still manages enough votes, we may have two such deputies representing Latvia.

If you are a Latvian citizen your vote on June 6 may be more than usually needed.

The past two months have seen unprecedented events buffeting Latvia’s politics, and have deepened the crisis that now threatens both Latvia’s economy and normal constitutional processes.

The violence of Jan. 13, when a peaceful protest meeting was followed by street trashing and looting in Riga’s Old Town, was shocking. Latvia had never experienced such wanton violence. Political change has always come peacefully, and even in the break-up of the Soviet Union the little violence that occurred came only from Soviet forces. Now it was civilian violence. Although it was condemned by all political forces and seems to have been the uncoordinated ramblings of youth gangs, the violence brought considerable political fallout. Many observers have asked why security forces were almost absent, despite warnings of trouble. Others argued this whole incident showed how low both the government and the Saeima had fallen in public trust and authority.

The build-up to this incident is worth considering.

In December, the government was still coping with the effects of the Parex Bank bailout, begging for its own bailout from the International Monetary Fund, and facing increased hostility from an aroused public. Important decisions such as the appointment of a new head of the Corruption Prevention and Combating Bureau (Korupcijas novēršanas un apkarošanas birojs, or KNAB) were delayed. It was also struggling with its own intended reforms: nearly halving the number of government ministries to 10, reducing the large number of local government entities, and limiting government spending. And it was not helped by its own ministers. Finance Minister Atis Slakteris crashed when agreeing to give an interview on the Latvian economic crisis to financial channel Bloomberg, inexplicably conducting it in his poor English. He characterised the crisis as “Nothing special” and assured viewers that “We will be taupīgi (thrifty).”

President Valdis Zatlers, originally seen as a ruling coalition puppet, had been increasingly active in attempts to solve the political crisis, suggesting a government of national unity, trying to get all parties to support the IMF borrowing, and pressing forward with his constitutional amendments that would, inter alia, make it easier to dismiss the Saeima.

On Dec. 12, the Saeima in an all-night sitting accepted the government’s proposed stabilisation plan and IMF borrowing, savagely cutting government spending, and raising income and value-added taxes. Prime Minister Ivars Godmanis stunned many by calling this Saeima one of the strongest parliaments in Europe to be able to take such decisive action.

Godmanis’ rhetoric was again to the fore on New Year’s Eve, when in words and images that would hitherto be indelibly associated with him, he referred to the Antarctic penguins who, in the coldest winter, would lock together shoulder to shoulder in groups, helping each other to keep warm and survive. This was how Latvians needed to help and support one another in this time of financial crisis.

While a goldmine for political cartoonists, such rhetoric also brought massive dissatisfaction. As commentators wryly pointed out, the penguins protect those most vulnerable who are kept warmest in the middle, while in Latvia it is the very opposite. The wealthiest are most protected by a number of measures—for example, no capital gains tax, no progressive taxation, loopholes in how much public servants and advisors can be paid—while the increased tax burden falls most heavily on those with medium or low incomes. As a particularly obnoxious example, transport minister and chief nasty Ainars Šlesers appointed his chauffeur’s son to a position on a government board for a salary of LVL 4,000 per month (about EUR 5,500) when pensioners have to survive on a 20th of this sum. Artis Pabriks, one of the leaders of the breakaway opposition group Society for a Different Politics (Sabiedrība citai politikai, or SCP), argued that quite contrary to Godmanis’ assertions, nowhere else in Europe would a parliament take the steps the Latvian parliament had taken. Raising taxes, lowering government spending and not controlling speculation were the exact opposite of what other European governments are doing to meet the economic crisis. 

On Jan. 13, the SCP called for an evening mass meeting to show popular anger at the government and to call for a new Saeima election. The meeting passed peacefully but with largely uninspiring speeches and little resolution, to be followed by the unexpected violence. It should be said that such violence has also been seen recently in several other European countries, with Iceland and Greece to the fore, and Lithuania a few days later, but in Rīga it struck in a particular way at Latvian political culture: every previous problem, no matter how severe, had always been met by avoiding violence and believing in collective action, non-violent persistence and discipline. Now this self-belief was challenged by an anarchic alienation.

The events of Jan. 13 galvanised the president into even more action. Angrily, he called on the Saeima and government to undertake a number of actions by March 31 or he would call for the dismissal of the Saeima (if the president does this, it must go to a referendum). He wanted the speedy and transparent appointment of the KNAB director, for the coalition government to include other parties, and for the Saeima to pass several long-lingering electoral reform and constitutional amendments.

Meanwhile, others were taking matters into their own hands. Farmers were outraged by a series of blunders and lack of support from Agriculture Minister Mārtiņš Roze, who was forced to resign after they drove their tractors to Rīga. Long-standing Culture Minister Helena Demakova also resigned, citing health problems, prompting commentators to opine the rats were leaving the sinking (and penguin-led?) ship.

Yet the coalition maintained its hold on power. It adopted some electoral reforms and seems to be nearing appointment of a KNAB director, but has fudged on Zatlers’ other demands and has been inert on widening the coalition. Meanwhile some parties are trying to make political capital. The People’s Party (Tautas partija) after Jan. 13 announced it would propose a constitutional amendment—which against precedent it would try to apply to this Saeima—to allow the Saeima to prorogue itself, a measure not currently allowed. Earlier it had absolutely opposed any such move. This seems to be another attempt by a discredited party to regain some popularity. But in coalition meetings and Saeima votes the People’s Party supports the coalition.

On Feb. 5, the opposition New Era party (Jaunais laiks)—itself unable to gain much political traction as a result of the political and financial crisis—moved a long-awaited motion of no-confidence in the government. The motion eventually lost, with a bare 51 votes against (the Saeima has 100 deputies), showing the paper-thin majority the coalition still commands. However, the event was marked however by a piece of political triteness that nevertheless symbolises the current divide in Latvian politics. Just before the debate, persons unknown had left a little brightly wrapped “gift” for Godmanis at the door of the Saeima. No, it was not a bomb, but a few trinkets left by supposed admirers. In the photo coverage of the event, all cameras were glued to the scene of Godmanis, seated before the Saeima, feigning surprise and untying the dainty package. Behind him was a full battery of the oligarchic ministers, at ease, self-satisfied and in no hurry to respond to any serious political or economic crisis. Nothing special.