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Latvian Parliament Adopts 2010 Austerity Budget

by Ulrika Lomas, Tax-News.com, Brussels

07 December 2009


Despite a huge public outcry and multiple protests, Latvia’s parliament has approved a highly controversial 2010 austerity budget, containing both unpopular rises in tax and dramatic cuts in spending.

In a desperate bid to appease international money lenders, the Latvian parliament adopted by 64 votes to 30 the country’s 2010 budget, which includes a rise in the rate of personal income tax, higher levies on motor vehicles, and the introduction of a capital gains tax, as well as spending cuts in key areas such as education and social services.

Latvia agreed a EUR7.5bn loans program last year with the European Union and the International Monetary Fund (IMF), and has so far received funding of EUR2bn. However, the loans are backed by an economic program, to which all ruling parties have signed up, designed to bring the state budget deficit under control.

Following the adoption of the 2010 budget law, the European Economic and Monetary Affairs Commissioner Joaquin Almunia stated: "I welcome the adoption by the Saeima (parliament) of the 2010 budget, which fulfils the objective of reducing the deficit by a further LAT500m (EUR711m) through reforms of the public sector and in the economy at large.”

He continued: “Yesterday's vote by the Latvian parliament is another key step towards strengthening international confidence in the ability of Latvia to deal with the challenges brought by the economic crisis and to implement the measures agreed with the international partners within the balance of payments financial support program.”

A joint review mission of international lenders, led by the European Commission and the IMF, has recently begun the process of assessing Latvia’s implementation of program conditions.


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