President Valdis Zatlers (right) speaks at a press conference with Prime Minister Valdis Dombrovskis.

RIGA — The sword of Damocles hanging over Latvia’s ruling coalition lowered another inch this week after suggestions that legislation aimed to strengthening the role of parliament in negotiations with international creditors might cripple the government’s core functions.

Lawmakers were expected to vote Thursday on a bill that would give the government the mandate to conduct talks with, and borrow funds from, international lenders such as the International Monetary Fund and the European Union.

Despite the fact that two governments have been at the negotiating table with the IMF, the EU and other lenders since late 2008, the ostensible need for the legislation arose after a Constitutional Court suggestion that the government might be overstepping its authorities by concluding agreements with lenders. As the court explained, Latvia is a parliamentary democracy and lawmakers should participate in agreements such as the €7.5 billion bailout loan.

But the court’s suggestion has been hijacked by the People’s Party, a senior member of the coalition that loathes New Era, which controls the prime minister’s seat and the finance ministry. The People’s Party has attached numerous conditions to the draft legislation that, in the words of Prime Minister Valdis Dombrovskis, are “unconstructive” and will put Latvia “in a dead end.”

“I hope that the parties in the Saeima will rise above political intrigue and recognize the national importance of talks with international creditors,” Dombrovskis told Latvijas Radio on Wednesday.

President Valdis Zatlers weighed in on the importance of Thursday’s vote, calling on lawmakers to reach a compromise. He also asked the People’s Party and New Era “to stop taking weak stabs at each other and neglecting national interests and to find a consensus.”

Latvia expects to receive some €800 million from international lenders in the first quarter of this year. If, however, lawmakers fail to give the mandate Thursday, the government will have to start talks from scratch, the finance ministry said.

Lawmakers were supposed to have approved the mandate last week but postponed the vote for one week — ostensibly to give the People’s Party time to draft its own version of the bill. According to reports, one phrase in the People’s Party’s version prohibits the introduction of any new taxes.

Thus with two versions of the mandate — the other was prepared by government minus the People’s Party — there’s no telling what the outcome will be.

But without a mandate, Latvia will, at best, have to begin negotiations anew with creditors. At worst, the government would collapse, ushering in an indeterminate phase of instability in the country, during which it is unlikely to receive any international aid. The threat of bankruptcy will sharply increase, and any hopes of an economic turnaround will be postponed.