Latvia's first female PM pledges to stick to fiscal discipline

Reuters News
Posted: Jan 22, 2014 8:06 AM

By Aija Krutaine

RIGA (Reuters) - The Latvian parliament approved on Wednesday the country's first woman prime minister, Laimdota Straujuma, who pledged to stick to the fiscal discipline of the previous cabinet and to push ahead with liberalizing the country's gas market.

Her predecessor, Valdis Dombrovskis, 42, steered Latvia through economic crisis and into the euro zone. He quit as prime minister in November, taking responsibility for the collapse of a Riga supermarket that killed more than 50 people.

Latvia saw its economy shrink 18 percent in 2009, the worst recession in the European Union. It has managed to return to growth after several years of drastic spending and wage cuts, becoming the 18th member of the euro zone on January 1.

"My government will be a continuity government," Straujuma told parliament, pledging to stick to the goal of keeping the budget deficit at 0.9 percent of gross domestic product this year.

Straujuma's government also said it will create a roadmap to fully liberalize the gas market no later than April 2017. The previous government had planned to begin gradually opening the market in April 2014.

Those plans could heighten tension with Russia, Latvia's former Soviet master. Russia supplies Latvia with gas, and it has protested similar plans in neighboring Lithuania.

Russia's Gazprom owns 34 percent of Latvijas Gaze, which has exclusive rights to operate the Latvian gas system until April 2017. The system includes one of Europe's biggest gas storage sites, Incukalns. Germany's E.ON owns another 47.2 percent of Latvijas Gaze.

Straujuma was approved by 64 of Latvia's 100 MPs. A 62-year-old veteran civil servant, she had held the post of agriculture minister in Dombrovskis' cabinet since October 2011.

"This government is formed... to create a good platform for the parties to campaign in upcoming elections," said Dainis Gaspuitis, an economist at SEB bank. "We can't expect any big achievements."

The new government includes the former opposition Union of Greens and Farmers, giving Straujuma's cabinet a majority in the parliament. It also has members of the previous coalition - the Unity Party, the Reform Party and the National Alliance - which had to rely on support from independent lawmakers to pass laws.

The parliament has already approved a budget for this year. Parliamentary elections are due in October.

Finance Minister Andris Vilks has remained in the cabinet, but Economy Minister Daniels Pavluts, who was also in charge of energy, was replaced by Vjaceslavs Dombrovskis, who comes from the same Unity party.

(Editing by Larry King)