The premier's resignation had been demanded by the country's two largest coalition parties, the People's Party and the Union of Greens and Farmers. The parties said they would leave the coalition if the embattled prime minister did not resign.
"The government of Latvia is incapable of working without the support of coalition partners, that is why I accepted the prime minister's resignation," Zatlers told a press conference.
Last Friday, Zatlers said he had lost confidence in Godmanis, who had refused to implement his earlier announced plans to cut a number of government ministries as part of anti-crisis measures.
The prime minister had survived an earlier no-confidence vote in parliament in early February as only forty lawmakers expressed no confidence in him, just 11 short of the 51-vote majority.
Latvia saw a wave of protests on January 13, when more than 40 people were injured in clashes with riot police. Demonstrators called for new parliamentary polls in the Baltic state and accused the government of economic mismanagement amid the financial crisis.
Latvia has experienced the worst economic decline in the European Union. By the end of the third quarter of 2008, the country's GDP had fallen 4.6% in 12 months. The country has been forced to take a 7.5 billion euro (about $10 billion) loan from the International Monetary Fund (IMF) and the European Union.
