"I invite Valdis Dombrovskis to form the government," said Zatlers, who had been locked in talks with leaders of Latvia’s parties since the government of Ivars Godmanis collapsed last Friday.

Zatlers said he picked Dombrovskis, 37, because of his solid economic and international experience, which is seen as crucial as once-booming Latvia struggles with an ever-deepening crisis.

Latvia, a former Soviet-ruled state which joined the European Union in 2004, had posted double-digit growth in recent years, but its economy is expected to contract 12 percent this year, with unemployment soaring to 12.7 percent.

The president did not tell reporters by when he expected Dombrovskis to stitch together a coalition – multi-party governments are the norm on Latvia’s fractious political scene.

Dombrovskis, of the centre-right opposition New Era party, is currently a member of the European Parliament.

He was finance minister from 2002 to 2004, and previously was chief economist of the Latvian central bank. He originally trained as a physicist.

Godmanis’ centre-right government collapsed last week under the weight of the economic crisis and as rifts intensified among its four member parties.

The government had been trying to tackle the deepening economic woes in this country of 2.3 million people which had grown used to boom times and increasing wealth, gains which are now under threat.

Latvia turned to the International Monetary Fund for a bailout late in 2008, and in December parliament slashed public spending and raised taxes as part of the deal.

Latvians’ discontent over belt-tightening and politicians’ alleged corruption and nepotism came to a head in a 13 January rally by 10,000 people in Riga, where hundreds of protesters clashed with security forces.

Fellow Baltic states Lithuania and Estonia face similar economic troubles after their own booms turned to bust, and Lithuania has also seen street clashes.

Reflecting chronic political instability, Godmanis’ 14-month-old coalition was Latvia’s 14th government since independence from Moscow in 1991.

AFP / Expatica