Dombrovskis chosen as Latvian PM

Valdis Dombrovskis will try to form a new coalition government

Latvian President Valdis Zatlers has nominated former finance minister Valdis Dombrovskis as prime minister and asked him to form a new government.

Mr Dombrovskis, who is a member of the European Parliament, is from the main centre-right opposition party, New Era.

After being nominated, Mr Dombrovskis warned that Latvia was "on the verge of bankruptcy" and would need to make budget cuts or risk financial collapse.

Ivars Godmanis resigned as PM last week amid protests at the economic crisis.

Latvia's economy is in recession and is expected to contract by up to 12% in 2009, with unemployment rising by 50%.

Mr Dombrovskis, 37, will now hold talks with Latvia's political parties on forming a new government. If they are successful, a list of ministers will be submitted to parliament for a confidence vote.

"I wish Valdis Dombrovskis luck," Mr Zatlers said on Thursday.

'Verge of bankruptcy'

Mr Godmanis, a member of the small Latvia's First/Latvia's Way party, resigned on Friday after losing the support of his two main coalition partners - the People's Party and the Union of Greens and Farmers.

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His government had come in for strong criticism over its handling of the economic crisis.

It was forced to seek a 7.5bn-euro ($9.6bn; £6.7bn) bail-out from the International Monetary Fund, World Bank and EU in December, after nationalising Latvia's second-biggest bank.

As part of the deal it has had to cut public spending and increase taxes - both unpopular policies.

A protest in the capital, Riga, on 13 January ended in more than 100 arrests and more than 40 injuries.

The Baltic nation was once the fastest growing economy in the European Union, but in the last three months of 2008 it was the worst-performing, with gross domestic product (GDP) falling 10.5%.

After being nominated as prime minister on Thursday, Mr Dombrovskis warned that Latvia was "on the verge of bankruptcy" and would need to make further budget cuts totalling at least 700m lats ($1.27bn; £889m) or else endanger funding from international lenders.

"The previous government hasn't fulfilled its obligations under the agreement with the IMF," he told reporters in Riga.

"Our primary task at the moment is to prepare budget cuts," he added. "There are no easy decisions here."

But Mr Dombrovskis said he would continue the former government's policy of keeping Latvia's currency, the lat, pegged to the euro.