Latvian PM and cabinet quit as corruption scandal widens

LATVIA:Latvian prime minister Aigars Kalvitis and his cabinet resigned yesterday, following criticism from the public and president of his attempt to sack an anti-corruption prosecutor who was investigating possible financial irregularities by the ruling party.

Four ministers left government and Latvia saw its biggest street protests since regaining independence from the Soviet Union in 1991, before Mr Kalvitis reinstated the well-respected Aleksejs Loskutovs.

The apparent campaign against the investigator drew withering criticism from the US ambassador to Latvia, and prompted Valdis Zatlers, the president, to urge Mr Kalvitis to quit.

He survived longer than any other post-1991 Latvian premier, and was the only one to win re-election in a politically turbulent country which has changed government about every 18 months since the collapse of Soviet rule.

Mr Zatlers said he would nominate a prime minister to form a new government after talks with three potential candidates, including outgoing interior minister Ivars Godmanis and former finance minister Valdis Dombrovskis, now a member of the opposition.

Mr Kalvitis's People's Party, which is the biggest in the ruling coalition, is expected to nominate culture minister Helena Demakova or finance minister Oskars Spurdzins.

As well as the Loskutovs affair, the four-party, centre-right government has been criticised for failing to dampen inflation, which in October grew at an annual rate of 13.2 per cent, the highest in the EU. Major financial institutions have warned Latvia that it risks a financial crash unless it tames inflation and cools down an economy that has grown at enormous speed in recent years, boosted by EU accession in 2004.

"I do not want to rush the [ selection] process, but I cannot delay it either," said Mr Zatlers, who said he would ask prime ministerial candidates how they would deal with Latvia's major problems and examine how much parliamentary support they would get.

He also praised Mr Kalvitis for ensuring the passage of a 2008 budget with a surplus and for sealing a border deal with Russia. But he said Mr Kalvitis had dealt poorly with soaring inflation and had mishandled the Loskutovs affair.