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INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE

UNCLAS SECTION 01 OF 02 RIGA 000788 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL LG
SUBJECT: PM ACCEPTS FM'S RESIGNATION; MACHINATIONS CONTINUE 
 
 
¶1. Summary:  October 22 began what will be a busy week in Latvia's 
ongoing political saga.  Prime Minister Aigars Kalvitis revised his 
earlier decision and accepted the resignation of Foreign Affairs 
Minister Artis Pabriks, effective October 29.  The opposition has 
called a special session of parliament for October 23 for a 
confidence vote in the government, which is expected to fail, but it 
will be a barometer of the situation within the coalition.  October 
24 there will be the first vote on the 2008 budget, which is also in 
effect a confidence vote in the government.  That same day, the 
anti-corruption agency is expected to announce fines against 
political parties for violations of campaign financing laws in the 
October 2006 elections.  The PM's People's Party is expected to be 
hit with a fine of up to one million dollars.  That event will bring 
into sharp relief the issue that started the current crisis; the 
dismissal of anti-corruption chief Loskutovs.  It remains unclear, 
though, when parliament will take that up.  Meanwhile, President 
Zatlers continues his political consultations, but his desired way 
forward remains unclear.  End summary. 
 
¶2. The week began when Prime Minister Aigars Kalvitis reversed his 
earlier decision and accepted the resignation of Foreign Affairs 
Minister Artis Pabriks, effective October 29. Pabriks will return to 
the parliament and says that he will remain in People's Party. 
Effective October 29, Minister of Culture Helena Demakova will serve 
as acting minister of foreign affairs until the Saeima approves a 
new minister. MFA contacts tell us that how this will all play out 
in practice remains very unclear. 
 
¶3. While Pabriks will remain in People's party, he may take a more 
independent approach in parliament.  Sacked local government 
minister Stokenbergs has said he will return to parliament and be an 
independent.  And coalition member Visvaldis Lacis has left his 
party over his announcement last week that he was told three weeks 
ago how to vote on the Loskutovs case.  Lacis has previously voted 
against the government on key issues, including the border treaty 
with Russia, but it still matters that he is officially becoming 
independent. 
 
¶4. Recent developments have energized the opposition. All three 
opposition parties in parliament signed a petition to convene an 
extraordinary Saeima session to hold no-confidence vote on the 
Kalvitis government. Despite signs of clashes within the ruling 
coalition, it is not expected that vote will pass on October 23. It 
will, however, provide a useful barometer of feelings within the 
coalition; especially if not many coalition MP's speak in defense of 
the government. 
 
¶5. The government has moved up the first reading of the 2008 budget 
to a special Saeima session on October 24.  It is expected to pass, 
as the PM had intensive discussions with coalition partners to 
secure their support. He also has met with the unions and addressed 
their concerns about what they viewed as too small increases in 
wages for public sector employees.  The PM claims that the money is 
being found elsewhere in the budget and that he will be able to 
preserve a surplus of one percent of GDP, which economic experts had 
said was essential for Latvia's economic health. 
 
¶6. Also on October 24, the KNAB is holding a press conference to 
announce fines against political parties for illegal contributions 
in the October 2006 parliamentary elections.  It is widely believed 
that Kalvitis' Peoples Party and coalition partner First Party will 
be fined.  The levy on People's Party is expected to be 500,000 
Lats, or roughly one million dollars.  Many speculate that the 
action to suspend and dismiss Loskutovs was designed to pre-empt 
these fines, but that does not appear to be the end result.  One 
opposition MP speculated to us today that the vote on Loskutovs in 
parliament could come as early as this Thursday, but that strikes us 
as unlikely.  The government is not yet in a position to manage a 
vote on Loskutovs' future, we believe. 
 
¶6. President Zatlers remains active, but his views on the way ahead 
are unclear. On October 19, after meeting with all parties 
represented in parliament, the President seemed to say that he 
opposed dismissing the Saeima, as proposed by opposition parties and 
labor unions.  In an October 21 press interview, the President 
placed responsibility for resolving the current crisis with the 
Saeima, specifically in its handling of the budget and Loskutovs. 
If the Saeima "fails in its duty", the President warned that he was 
willing to use any instruments provided him by the Constitution, 
including the dismissal of the Saeima.  (Note: Under the 
constitution, this would require a referendum and, if it failed, 
Zatlers would be removed from office.  End note.) 
 
¶7. Comment: The constantly changing statements and actions show that 
there could be some unexpected moves from the government and the 
President in the coming days, but we continue to believe that the 
political leaders will attempt to stage manage the situation. On the 
one hand, the government now has three vacant positions in the 
cabinet and can count on at least two fewer votes in parliament and 
likely three.  On the other hand, it remains unclear how a new 
coalition could be easily assembled.  It is possible that the 
government will operate in a continued limbo and seeming crisis 
through December, as two coalition members have party congresses at 
 
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the end of November that could be vital.  In the meantime, Latvia's 
attention will likely be focused heavily inward. 
 
SELDOWITZ