Fitch Ratings has become the second service to cut Latvia’s credit rating to “junk” status, but the country’s finance minister says the decision will not affect its economic stabilization plan.

The London-based ratings service on April 8 cut Latvia’s long-term credit rating to BB+ from BBB-. Fitch also downgraded its ratings for Estonia and Lithuania, warning that their economic ties to Latvia will put them under more pressure.

In February, the ratings service Standard & Poor took similar action on Latvia, making it the second European Union country after Romania to fall to junk status.

The downgrade for Latvia comes as the country’s new government has been working to shore up loans arranged late last year with the International Monetary Fund and the European Union.

“The downgrade of Latvia’s ratings reflects the deterioration in the prospects for the Latvian economy and elevated risk of policy slippage since the agreement of the EUR 7.5 billion loan package with the IMF, EU and other international lenders in December 2008,” the ratings service said in a press release.

Fitch has forecast Latvia’s economy will shrink by 12 percent this year, much more than the 5 percent contraction the Latvian government used in approving its current budget.

A delay by the Latvian government in submitting a revised austerity budget, Fitch said, may force the IMF and EU to hold back on the loans. The ratings service also warned that the risk of devaluation of the national currency, the lat, has increased and would be a “severely negative” scenario.

Finance Minister Einars Repše said in a press release that Latvia’s negotiations with international lenders will continue as it works to stabilize the economy. However, the ministry acknowledged that the downgrade is a blow to the country, which generally has had a credit rating favorable to foreign investment.

Fitch followed its announcement on the Baltic states with action April 9 on several banks. In Latvia, SEB Banka, Swedbank and Latvijas Krajbanka all have had their ratings lowered.

Latvia’s parliament has approved a pair of constitutional amendments that will allow citizens to initiate a recall of the Saeima.

The April 8 action by the Saeima fulfills one of the demands President Valdis Zatlers laid out in a Jan. 14 ultimatum to the parliament and the government. He had promised to dissolve the Saeima if his demands to reform the political system and strengthen the country’s economy were not taken, but on his self-imposed deadline of March 31 announced that most of them had been met.

Members of the Saeima voted 85-3 to approve on their third reading the amendments to articles 14 and 49 of the constitution, according to the parliament’s Web site.

Under the amendments, which will take effect with the election of the 10th Saeima, voters will have the right to initiate a recall of the parliament. At least 10 percent of eligible voters must petition for the recall. A national referendum would then be held. If two-thirds the number of voters in the previous parliamentary election participate in the referendum and if the referendum passes, then the Saeima is dissolved and new elections are ordered.

Under the current language of the constitution, only the president can initiate dismissal of the parliament. However, the president also takes a risk in doing so. After the president calls for dismissing the Saeima, a national referendum is ordered. If the referendum succeeds, the parliament is dissolved and new elections are held. But if the referendum fails, the president must step down and the Saeima picks a new head of state.

The amendments approved April 8 limit exactly when a popular recall is allowed.

It cannot be initiated sooner than a year after convening of a new parliament, nor less than a year before the Saeima’s time in office comes to a close. Since the Saeima is elected for a four-year term, that means the popular recall could take place during the second or third years.

The amendments also do not allow a popular recall within six months of the end of the president’s term in office, nor no sooner than six months since the last attempt at a popular recall.

Under the amendments, new elections must be held between one and three months after parliament is dissolved.

As before, voters are not allowed to recall individual members of the Saeima.

Zatlers had called for passage of the the constitutional amendments after a large anti-government demonstration on Jan. 13 that had demanded he dissolve the Saeima.

In August, a national referendum to force the Saeima to adopt similar amendments failed to attract enough voters to count.

The overall unemployment rate in Latvia reached 10.7 percent in March, rising 1.2 percentage points from February, the State Employment Agency (Nodarbinātības valsts aģentūrā) announced April 7.

February’s unemployment rate was 9.5 percent.

The number of unemployed workers in Latvia reached 103,731 in March, the agency reported. White collar workers were among those increasingly joining the ranks of the unemployed.

“In March the largest number of unemployed had professional (38.4 percent) and general secondary education (28.5 percent),” said Baiba Paševica, director of the State Employment Agency. “Among the jobless with higher education the greatest number are engineers, economists, teachers, lawyers and technologists.”

The Rēzekne region, often one of the hardest hit in terms of joblessness, recorded the highest unemployment rate in Latvia, 23.1 percent. Other areas with high unemployment, according to the agency, were Ludza region, 19 percent; Rēzekne city, 17.8 percent; Balvi region, 17 percent; Dobele region, 16.7 percent; Preiļi region, 16.5 percent; Krāslava region, 15.3 percent; Kuldīga region, 14.2 percent; Aizkraukle region, 13.7 percent; Jēkabpils region, 13.5 percent; Liepāja city, 13 percent; and Liepāja region, 12.9 percent.

The lowest unemployment figures in March were recorded in the Tukums region, 7.1 percent; Rīga city, 8.2 percent; Jūrmala city, 8.4 percent; Daugavpils city, 9.2 percent; Jelgava city, 9.6 percent; Ventspils region, 9.7 percent, Talsi region, 10.1 percent; Valmiera region, 10.1 percent; Ventspils city, 10.2 percent; Jelgava region, 10.3; and Limbaži region, 10.5 percent.

Of those who were without work in March, 26.5 percent were between 45 and 54 years old, 22.7 percent were 25-34 and 22.2 percent were 35-44.

In April and May 2008, the unemployment rate in Latvia bottomed out at 4.8 percent.