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.