Latvia’s government first collapsed in February when its President accepted the resignation of its then Prime Minister and a new coalition government was formed.
The coalition’s fall adds to the economic problems of the small Baltic state which last year had to take a 7.5 billion euro (£6.6 billion) IMF-led rescue loan last year.
The country of 2.3 million people, a European Union and Nato member since 2004, has had a history of revolving door politics since it quit the Soviet Union in 1991, with the same parties swapping in and out of coalition governments.
The largest ruling parties, the People’s Party and the Union of Greens and Farmers, said they had lost confidence in Mr Godmanis forcing him to quit.
One opposition party said the move was aimed at eventually giving the People’s Party a tighter grip on power, and possibly the prime minister’s job, ahead of municipal elections in June.
The government is also due to make further budget cuts due to the deep slowdown after an austerity plan launched under the deal to win the IMF and EU bail out. The economy is forecast to drop 12 per cent this year.
Latvia’s central bank urged politicians to ensure they stuck to the deal and said the new team should be in place in a week.
“Most politicians want control of government, even in the worst of times,” said Krisjanis Karins of the opposition New Era party. Recent polls have shown opposition parties will win an election, but that trust in parliament is also low.
“This government fell for two reasons: one, because of its inability to act and get things done, and secondly because parties want to position themselves better before municipal elections this year,” said political commentator Karlis Streips.
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Latvia has severe economic problems. The government is run by a 5 party coalition but one of the partners has walked out because of the failure of its action plan to get consent by the Latvian Prime Minister.
The Latvian economy is facing 20 per cent unemployment and an economy that has contracted by 18%. This is a very serious situation this country.
The People’s Party quit after its action plan failed to get the backing of Valdis Dombrovskis, the Latvian prime minister, who labelled it “populist”.
Mr Dombrovskis warned the People’s Party’s departure could cause yet further economic instability.
“Any contradictions in the government are immediately reflected in the financial markets, and they directly affect the fiscal stability our country… a policy that is truly responsible for the country cannot be self-centred,” he said.
But he said remained confident that an emergency IMF bail-out worth £6.7bn would remain unaffected by the political instability.
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