Latvia faces uncertainty

RIGA: Latvia must convince investors a political crisis sparked by the president over corruption will be of long-term good, but it is likely to create uncertainty, the finance minister was quoted on Sunday as saying.

President Valdis Zatlers on Saturday announced he would call a referendum to dissolve parliament, which was only elected in October last year, after lawmakers blocked an investigation of a prominent legislator and businessman.

Zatlers said he wanted to stop the influence of a narrow circle of oligarchs in Latvia, which in 2008 took a 7.5 billion euro ($10.74 billion) bailout from the IMF and EU and which has said it wants to re-enter international capital markets this year.

"Together we have more or less got over our economic shock (of a deep recession) and we are getting ready for a phase of convincing growth, beginning from next year," Baltic news agency BNS quoted Finance Minister Andris Vilks as saying.

"But in the moral sphere, also in electing the new parliament, we have seen a few strange decisions," he said.

Latvian news agency LETA quoted Vilks as saying that the president's decision had made his life more difficult.

"We were near a strong spurt ahead, there was good publicity (for Latvia), but now further uncertainty has been created," Vilks was quoted by LETA as saying.

He said the main thing was to make sure there was good communication with investors.

On BNS, he was quoted as saying the president's actions could lead to more transparency, which would be good for investors.

"Latvia has for long been in the category of countries where the political climate and political questions are not really clear to anyone," he added.

Vilks has said Latvia could soon aim to borrow again on capital markets to refinance loans from the IMF and EU programme.

] Latvia last week got approval for another tranche of aid from the Fund, but does not intend to draw on the funds as it says it has enough cash on hand. Latvia has so far taken 4.4 billion euros of the 7.5 billion euro rescue programme.

Vilks said credit rating agencies had to look at what Latvia had achieved in overcoming the crisis and hoped that speculation linked to political problems would not break out.

"From my side I will do everything to explain and reassure, so that people both here and abroad believe in Latvia," he said.

Copyright Reuters, 2011