CORRECTED-UPDATE 1-IMF programme, euro plans at stake in Latvia

(corrects family name of first pensioner in para 9)

* Vote to reflect views on bailout, austerity package

* Main Russian minority party expected to win most votes

* Centre-right PM still has chance of forming new government

(Adds polls opened, voters’ quotes)

By Patrick Lannin and Aija Braslina

RIGA, Oct 2 (Reuters) - Latvians voted on Saturday after enduring the sharpest recession in the EU, and their verdict could determine the country’s commitment to its IMF-led austerity programme and the goal of euro entry in 2014.

Before the election for the 100-seat parliament, opinion polls suggested the centre-right coalition under Prime Minister Valdis Dombrovskis had a chance of returning to power, probably safeguarding the austerity plan that came with a 7.5 billion euro ($10 billion) bailout agreed at the end of 2008.

But an opposition party with strong support among the large Russian minority hopes anger over the crisis will secure it the largest share of the vote and a place in government for the first time since the 1991 fall of the Soviet Union. [ID:nLDE68T0F6]

The Harmony Centre party has said it would seek revisions to the loan deal with the International Monetary Fund (IMF) and the European Union (EU). It also raised the prospect of seeking funds and investment from countries like China and Russia.

Critics say the party would bring greater Russian influence in Latvia, a European Union and NATO state since 2004. Harmony denies this.

Investors believe a coalition without Dombrovskis, regarded as the main guarantor of the bailout programme, would carry the greatest risk of uncertainty. [ID:nLDE6901U8]

Voting began at 7 a.m. (0400 GMT) and ends at 8 p.m. (1700).

Economic output in Latvia, a country of 2.2 million people, plunged 18 percent in 2009, the biggest drop in the EU.

“I went to vote so that things will change and pensions will not be cut,” said pensioner Pavils Salna in the centre of capital city Riga. He said he backed Dombrovskis.

Fellow pensioner Solveiga Zhvirble said she voted for Dombrovskis’s coalition partner, the Union of Greens and Farmers. “I voted for young people and I crossed out (on the ballot slip) all the old ones who have been there too long.”

Despite market fears of uncertainty, analysts do not think Latvia will abandon the IMF/EU deal, even without Dombrovskis. They expect any government to realise it needs the international loans to plug holes in the budget. [ID:nLDE68Q0NS]


For a graphic, click on

For a menu of election stories, click on [ID:nLDE68R0XQ]



The coalition is a minority government but an opinion poll on Monday showed it could return as a majority, with the Unity bloc led by Dombrovskis as the biggest party.

Dombrovskis wants to re-form the current government with the Union of Greens and Farmers party and the Everything for Latvia/For Fatherland and Freedom bloc. [ID:nLDE68S13P]

The IMF and EU programme aimed to reduce the budget deficit, avoiding a devaluation and paving the way for euro adoption in 2014.

Domestic critics have said the plan puts too much emphasis on austerity and not enough on development and investment.

Nordic states, whose banks such as Swedbank SWEDa.ST and SEB SEBa.ST are heavily exposed to the Baltic region, also provided funds for the bailout.

Despite harsh budgets, Dombrovskis has stayed popular and is viewed as a crisis manager solving problems left by others. He has an image as an honest man amid cynicism over corruption.

The economy has started to show signs of recovery but tough budgets will be needed this year and next.

Harmony Centre has sought to woo ethnic Latvians by painting itself as the main social-democratic alternative. A good showing by Harmony Centre could persuade Dombrovskis to bring it into the government to strengthen the coalition’s majority.