By Johan Ahlander and Gederts Gelzis
RIGA (Reuters) - Latvia's ruling coalition lost its majority and two newly formed parties took more than a quarter of the votes amid widespread disillusion with the Baltic country's politicians, the result in Saturday's parliamentary elections showed with 80 percent of the votes counted.
The country of 2 million, a quarter of whom are ethnic Russians, is a frontline state in Europe's and NATO's increasingly tense relationship with Vladimir Putin.
The pro-Russia party Harmony remained the biggest with 20 percent, due to its support from Russian-speakers, but will find it difficult to get in government as parties that oppose it because of its Moscow ties won enough votes.
Latvia has long been plagued by corruption and money-laundering issues. The country's central bank governor is currently awaiting trial for accepting a bribe.
In part because of those issues, two newcomers, populist party KPV LV and anti-corruption party the New Conservatives, both won around 14 percent of the vote each to became the second- and third-biggest parties.
"This political party doesn't take instructions or orders, whims of its founders, supporters or various other people who stand behind it," Janis Bordans, party leader for the New Conservatives, told supporters after the election. "Faith in the rule of law will return to the people!"
The new parliament will be more fragmented and a broad coalition of ethnic Latvian parties is seen as the most likely outcome by political analysts. However, with seven parties winning seats, coalition talks could go on for weeks or months.
"Forming a new government will be very difficult," current Prime Minister Māris Kucinskis of the Union of Greens and Farmers said after the election.
The ruling coalition consisting of his party, the National Alliance and the Unity party appear to have lost almost half of its votes.
"The messages that the voters have tried to send is that we're going to have some new faces in politics," Janis Ikstens, political scientist at Latvia University, told Reuters. "And perhaps they’re not happy with the neglect of social needs."
Before the election, some Latvians feared a strong result for Harmony and KPV could lead to them forming a government and bringing the Latvia's foreign policy closer to Putin's Russia. But given the result, that looks unlikely, according to Ikstens.
Harmony recently rebranded itself as a Western-style Social Democratic party, saying it is committed to the European Union and NATO.
But it only last year ended its official cooperation agreement with Putin's United Russia Party, raising concerns its transformation is only skin deep.
Latvia, a member of the European Union and NATO, shares a 276-kilometre (167 miles) border with Russia.
NATO currently has more than 1,000 troops deployed in the Baltic country of 2 million and even the potential of a minor shift in allegiance in Latvia will worry both Brussels and Washington.
(Reporting by Johan Ahlander and Gederts Gelzis; Editing by Ros Russell, Hugh Lawson and Dan Grebler)