Cablegate: Could Territorial Reform Destabilize the Ruling Coalition?

R 040428Z JUN 08



E.O. 12958: N/A
SUBJECT: Could territorial reform destabilize the ruling coalition?

1. Summary. The adoption and implementation of the administrative
reform which would consolidate many small local governments (527)
into bigger regional governments (88 or 127 municipal districts) has
become a major object of disagreement between the two biggest
parties in the ruling coalition -- People's Party (TP) and the Union
of the Greens and Farmers (ZZS). TP's key public arguments for the
reform are that bigger municipalities would have more resources and
capacity, while the ZZS states that the mergers would seriously
complicate the access to a number of crucial public services,
including education and health care, for rural residents. However,
some politicians and political experts argue that those are only
public arguments and the real reason behind the disagreement is the
fight for the zones of influence in regions. Some experts even
speculate that the fight might result in changes of the ruling
coalition in the fall when the map of the future regions is on the
Saeima agenda. Because this is about resources, it is the kind of
issue that could be used to bring down the Godmanis government. But
we think it would be an excuse to do so rather than the real reason
and continue to believe the coalition is stable for the immediate
future. End summary

2. The large number of small local governments in a sparsely
populated country was one of the heritages left by the Soviet
period. Over 10 years ago the government took a decision to
consolidate the local governments with the aim to save resources,
improve efficiency in the work of local governments and raise the
quality of their services. The need of the reform has been
acknowledged by many international actors, including the World Bank.
The implementation of the reform requires numerous changes,
including drafting and amending numerous laws (about 100 laws should
be amended) and practical management rearrangements, including
changes in the local education, health and social care systems.
Given the scope of the change, there is resistance to the reform
among rural residents, who fear degradation in the quality of
government services.

3. Until now, no government has had the political will necessary to
tackle such a complicated issue. The People's Party saw it as a
chance to build political capital and set the adoption and
implementation of the administrative reform as one of its key
priorities after the 1006 elections when the party was asked to form
the government. However, TP has not been very successful, mainly
due to strong objections from one of its coalition partners, ZZS,
which claims to represent the desire of small local municipalities
to remain independent.

4. However, it seems that more is at play. As post was told by New
Era Saeima faction head Dzintars Zakis, it is a fight between the
two parties about influence and control of budgetary resources. TP
hopes that the reform will help to strengthen its positions in the
rural areas because many of the local governments it leads would
remain, while ZZS objects because it many small local governments
they are currently running would be eliminated. The media has
reported on the attempts of both parties to find allies among other
parties, however, no formal coalitions have been formed or common
decisions taken.

5. Comment. According to several political experts the
administrative reform could become a stumbling stone for the
Godmanis government. However, this is most likely to be an excuse
for bringing down the government when politically expedient, rather
than the actual cause. It seems to us more likely that the parties
will reach a compromise regarding the reform since there are many
other issues, including economic interests, where they need each
other's support.


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