Tuesday October 13, 05:38 PM
EU budget chief urges Latvia to stick to bailout deal
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RIGA (AFP) - The European Union's budget chief Joaquin Almunia on Tuesday urged Latvia to follow through with controversial belt-tightening measures agreed with international lenders amid rising political tensions.
"Honestly, I don't see an alternative," European commissioner Almunia said, after talks with parliamentary leaders on reducing the 2010 budget deficit by 500 million lats (1.035 billion dollars, 711 million euros).
The Latvian government reached a preliminary agreement on Monday on reducing the deficit through spending cuts and new taxes. But the People's Party, a key member of the five-party ruling coalition, has denounced the measures.
Prime Minister Valdis Dombrovskis meanwhile told the press after talks with Almunia that the measures agreed would result in a budget deficit in 2010 equivalent to 7.5 percent of the gross domestic product (GDP).
With its GDP expected to contract by 18 percent this year, Latvia has been under intense pressure to respect the conditions of a 7.5-billion-euro rescue package from the International Monetary Fund, Sweden and the European Union.
Under the deal, Latvia committed itself to slash 500 million lats each year until 2012 to meet EU-set rules on reining in the public spending deficit.
On Monday, the government agreed to stick to the terms of the bailout deal.
But the People's Party has opposed introducing a property tax along with other measures in 2010, saying they could worsen Latvia's economic crisis.
After meeting with Almunia, party chiefs signalled a reticent agreement.
"Nothing else is left other than to fulfil the unreasonable demands of the international lenders," the People's Party heavyweight, Vents Armands Krauklis, was quoted as saying.
Almunia said he hoped the Latvian government and parliament would live up to their side of the international rescue package and warned: "Let's not consider the hypothesis that the budget will not be approved."
The budget is set to go before parliament by the end of the month.
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