"Are you for or against the dissolution of parliament?" This is the question which 1.5 million Latvians are being called to answer in a referendum that will take place on 23rd July. This popular consultation follows the announcement made by outgoing President Valdis Zatlers on 28th May requesting the dissolution of the Saiema (the only chamber in the Latvian Parliament). To enter force dissolution must absolutely be confirmed by a popular referendum. If the Latvians answer "yes" on 23rd July the Saeima will be dissolved and new general elections will be organised, probably in September. In the event of the contrary the head of State will have to resign and the parliament will remain.

No quorum in terms of minimum participation is required to validate the referendum result that will be decided by the simple majority of the votes.

Another result of the outgoing Head of State's decision is that he was replaced on 2nd June last as head of State by Andris Berzins (close to the Union of Latvian Greens and Farmers Party, ZZS), elected by 53 of the 100 members of Parliament. Standing to be re-elected and with the support of Unity (V), Prime Minister Valdis Dombrovskis's coalition (which brings together New Era, led by Solvita Aboltina, the Civic Union led by Girts Valdis Kristovskis and the Society for Different Politics (SCP) led by Aigars Stokenbergs) and the National Alliance coalition that rallies All for Latvia (VL), Valdis Zatlers won 41 votes. He had said he was aware of the consequences that his decision might have on his chances of being re-elected to his post.

The shock of Valdis Zatlers' decision

On 28th May last the outgoing President of the Republic of Latvia informed his countrymen during a TV programme on the channel LNT of his decision to dissolve the Saiema, according to the powers he enjoyed in virtue of article 48 of the Constitution. "I want to give hope that things will change. We must put an end to behaviour that goes against the interests of the people of our country. This is why I wanted to tell you on live TV that I have signed the presidential decree requesting the dissolution of parliament and that I have submitted this to the Constitutional Court. The decree takes immediate effect," he declared.

Valdis Zatlers justified his act by the refusal of MPs on 26th May to lift the parliamentary immunity on businessman Ainars Slesers, leader of Latvia's First-Latvian Way (LPP-LC) and former deputy mayor of Riga, who is suspected of having paid and received bribes, of laundering money, of making false declarations and misuse of power. The vote of the members of the Saeima prevented the court from making a search of his home. Several companies, including the free port of Riga, Euroline and the Baltic Aviation System had already been searched. Ainars Slesers denies however that these companies, which do not appear in his tax declaration, belong to him and says they are the property of his business partner, Viesturs Koziols.

On 20th May last the Office for the Prevention of Corruption (KNAB) launched an inquiry into allegations of money laundering, corruption, fraudulent transactions, abuse of power and false declarations involving several politicians. During a search of the house of Aivars Lembergs (ZZS), Mayor of Ventspils since 1988, who is being prosecuted for corruption and money laundering, the police seized documents concerning the People's Party (TP) leader, Andris Skele, and former Ministers Ainars Slesers. The parties of these two men merged together on 26th April 2010 within the movement called "For a Good Latvia".

"The Saiema's vote is a wake-up call that reveals a serious conflict between legislative power and legal authorities, the two of the three powers on which our country is based," said the outgoing President of the Republic of Latvia, Valdis Zatlers who said it was not the first time that the Saeima had defied the legal system, an allusion to the MPs opposition in April 2010 to the re-election of Janis Maizitis as General Prosecutor. "Parliament has lacked respect and defied the competence of the legal authorities. It has defended the interests of a group of people more than those of the State and people have seen that MPs have defended each other as a priority. The Latvians have made a great number of sacrifices – was this so that the State could be robbed? Politicians have to come to a new agreement with the people in order to act in the interest of the public. The Latvians want a cleaner political class which has fewer links with money," added the Head of State.

On 29th May, when asked about the names of the oligarchs he was accusing, Valdis Zatlers quoted the "Three A's" as it is custom to call them - Aivars Lembergs, Ainars Slesers, (Deputy Prime Minister, 2002-2004, Economic Affairs Minister, 1998-1999 and Transport Minister, 2004-2009) and Andris Skele (Prime Minister, 1995-1997 and 1999-2000); all three, who are both politicians and businessmen, have been the focus of police and legal enquiries over the last twenty years.

Aivars Lemberg has accused Valdis Zatlers of lying and has said that the campaign against him was being funded by George Soros "who received the outgoing President of the Republic in an extremely cordial manner when he was on a recent visit in New York."

Ainars Slesers believes that the dissolution of parliament is anti-constitutional. However he does not intend to appeal to the courts, believing that they will not take a decision before the referendum. "It is not the first scandal in which my name has been mentioned. Each of them leaves its mark, but I think that our voters are sensible," he declared.

On 26th May the coalition Unity led by Prime Minister Valdis Dombrovskis voted in favour of the lifting of parliamentary immunity on Ainars Slesers whilst his government partner, the Union of Latvian Greens and Farmers Party, (ZZS) was opposed to it. Mr Dombrovskis said that he had spoken seriously with his allies, whom he also accuses of having done everything for the law on the funding of political parties not to be approved. "We have reached a certain threshold and the government coalition may not survive another vote like this. This is a yellow card, two yellow cards equal a red," indicated the Prime Minister as he spoke to the MPs of the ZZS.

What are the consequences for Latvia?

Several options are open to Valdis Zatlers: he could found his own political party, join an existing party or even create a new NGO. The outgoing President is due to reveal what his plans are on 8th July next, the day that Andris Berzins succeeds him as head of State.

Valdis Zatlers has also decided to replace the traditional presidential reception for the end of his mandate on 3rd July by a public open air event in the Liktendarzs Garden in Koknese town centre. This is not an innocent choice since the garden has a particular meaning for the Latvians: it symbolises the fight against totalitarian regimes that dominated the country in the 20th century.

Moreover the Unity coalition, three parties of which will merge to form one single party on 6th August next, a decision lauded by the outgoing Head of State, has invited Valdis Zatlers to join it.

According to Andris Ozols, director of the Latvian Investment and Development Agency, the recent political events have had little effect on investor and economic analysts' behaviour. The latter recently congratulated the country for its return to the financial markets. Latvia has just issued euro-bonds to a total value of 500 million $ (around 350 million €) on the international markets from which it had been absent for over three years. Edward Lucas, a journalist with The Economist, stressed that the country had emerged from financial instability, and that as a result the political crisis could be contained.

Ratings agency Moody's has raised its outlook for Riga from stable to positive (Baa3). Exports and investments continue to progress and GDP growth rose to 3.4% over the first quarter of this year. Finally the budgetary deficit is due to reach 4.5% of the GDP this year and drop below the 3% mark in 2012 as required by the EU's Stability and Growth Pact.

On 16th June last the government ended the mandate of the head of the Office for the Prevention of Corruption, Normundus Vilinitis who had been appointed by the government of Prime Minister (2007-2009) Ivars Godmanis (Latvia's First-Latvia's Way, LPP-LC) at the beginning of 2009, thereby confirming the vote made by parliament a few days earlier. His deputy, Juta Strike, will ensure the interim until the appointment of his successor.

The political parties seem to want to come clean before the general elections which everyone expects will take place in the autumn. Most political analysts believe that the Latvians will confirm the decision to dissolve the parliament taken by Valdis Zatlers. "The parties who prevented the re-election of Valdis Zatlers may possibly get what they deserve in the next general election," stresses economic analyst Aidan Manktelow. According to the polls, early general elections could be advantageous to the nationalist parties, on the right and the left, as well as to Harmony Centre. A poll on 21st June gave Harmony Centre 18.5%, Unity 14.7%, the ZZS 10.5% and All for Latvia (VL), 8.8% in terms of voting intentions.

On 8th June last 6000 people rallied on the island in the centre of the capital, Riga, for the "burial ceremony of the oligarchs". The idea behind this event was to encourage Latvians to boycott the oligarchs, i.e. the refuse their favours, give up serving them in restaurants, not to put on the shows in theatres where they might go, refuse all employment in institutions where the oligarchs are present, etc. Those who came were also invited to read the press and emerge from their inertia. The organisers recently created an internet platform : www.manabalss.lv, (mana balss means "my voice" in Latvian) in order to motivate the population to take action notably via the signature of petitions. More than two thousand people have already voted in support of a draft amendment to the rules in the Saeima, which would facilitate the inclusion of any public initiative signed by at least ten thousand people, on the parliamentary agenda.

By deciding to convene a referendum Valdis Zatlers, who was the first President in Latvia's history to use his power to dissolve parliament, has become a hero in the opinion of some. Others however, regret that the head of State took the risk of plunging a country, that has already suffered greatly because of the global economic crisis, and which is struggling to find its way back to growth, into political disarray. And others believe that Valdis Zatlers, who feared that he would not be re-elected, has made a political coup by using dissolution as an exit gate.

"Valdis Zatlers has broken twenty years of oligarch influence," declared the former President of the Latvia Republic (1999-2007), Vaira Vike-Freiberga. "The election of Andris Berzins is a massive step backwards in terms of the country winning its independence from the oligarchs", added the former Head of State. "I think that the Valdis Zatlers took an important decision in order to reduce significantly the role played the oligarchs in politics," said Prime Minister Valdis Dombrovskis.