Last night, it was announced that the leader of the Latvian People’s Party, Mareks Seglins, is to resign. The People’s Party is the largest party in the Latvian coalition government. Former prime minister, Andris Skele, who has not been officially active in Latvian politics for some time, will take over as the new official leader of the party.
Mr Skele yesterday said he would be ready to become prime minister again. It should be noted that Mr Skele has previously voiced support for a Latvian devaluation. This could unnerve markets yet again. Mr Skele has previously been prime minister three times. He is a founding father of the People’s Party and is one of Latvia’s most wealthy individuals.
The fact that Mr Skele has said he would not rule out becoming prime minister has to be seen as an indirect challenge of Prime Minister Dombrovskis’s position and his New Era Party’s role in the government.
Yesterday, the People’s Party apparently agreed to support Prime Minister Dombrovskis’s effort to fulfil Latvia’s agreement with the EU and the IMF to cut the budget deficit by LVT500m – something the party until now has resisted. Initial indications are that Mr Skele also supports these budget cuts, but we are not certain about how strong his commitment to the cuts is and we therefore remain very sceptical about the Latvian government’s real commitment to passing a budget that ensures budget cuts.
Mr Skele has, on a number of occasions, vocally supported the idea of a devaluation of the Latvian lat – something Prime Minister Dombrovskis and the Latvian central bank are staunch opponents of. It will therefore be very interesting to hear whether Mr Skele will once again voice his support for a change of the currency regime or whether he will be loyal to the government’s official continued support for the quasi-currency board regime.
Concluding, Latvian politics remains highly fluid and uncertainty remains very high. With Mr Skele’s re-entry to Latvian politics, another dimension has been added.
