Latvian gov't wins election, painful reforms ahead

Latvia's center-right government was poised to stay in power Sunday after voters backed its plans to continue painful reforms required by an international bailout program to fix the Baltic country's crippled economy.

With about 98 percent of precincts counted, Prime Minister Valdis Dombrovskis' minority coalition had mustered more than 57 percent of the vote in Latvia's parliamentary election Saturday. That would likely give it more than 60 seats in the 100-member legislature.

Dombrovskis' centrist Unity bloc finished first with 31 percent of the vote, while a pro-Russia opposition party, Harmony Center, came in second with 26 percent.

"The existing coalition parties will begin talks on forming a new government," he told reporters as the results came in.

The 39-year-old Dombrovskis, one of Europe's youngest prime ministers, took office in March 2009 after a wave of unrest related to Latvia's double-digit recession led to the collapse of the previous coalition.

He has promised further austerity measures to comply with the terms of a a euro7.5 billion ($10.3 billion) bailout package designed by the International Monetary Fund and European nations to help Latvia stave off bankruptcy.

Latvia's economy started nose-diving in 2008, plunging 25 percent in two years - the worst drop in the European Union.

The next government will have to make some 400 million lats ($770 million) in both tax hikes and budget cuts to bring the 2011 budget deficit down to 6 percent as mandated by the IMF-led deal.

Opinion polls before the election had suggested that the left-leaning Harmony Center, a party catering mainly to Latvia's Russian-speaking minority, would make strong gains by plugging into discontent over austerity measures.

Leaders of Harmony Center have said they would like to re-negotiate part of the bailout package.

Russian-speakers, mostly ethnic Russians but also Ukrainians and Belorussians, represent one-third of the 2.3 million population in the former Soviet republic, which joined the EU and NATO in 2004.

Coalition talks were scheduled to begin Sunday afternoon between Unity and its current partners: the populist Greens and Farmers Union, which finished third in the election, and the right-wing bloc For Fatherland and Freedom.

Dombrovskis said Saturday that he did not rule out cooperation with the center-left Harmony Center and that Unity would search for "touchstones" in bilateral talks Sunday.

However, it is unlikely that Harmony Center, which has signed a cooperation agreement with the Kremlin party United Russia, will be invited to take part in the next government given the intense animosity with the nationalist Fatherland party.

President Valdis Zatlers, whose responsibility is to name the next prime minister, has hinted he would like to see the Dombrovskis-led government stay in office.