RIGA - During an extraordinary meeting on Oct. 8, the government unanimously approved a draft plan for the 2008 budget and submitted it to Parliament for review.
The budget plan has produced considerable discontent both among union leaders and within the government coalition itself. Analysts concerned about the nation's state of health say the meager 1 percent surplus 's itself a novelty in Latvian fiscal policy 's may not be enough to combat inflation.
The Free Trade Union Confederation of Latvia is preparing to hold large demonstrations outside of Parliament due to a lack of social provisions in the proposed budget 's primarily in the form of wage hikes (see story on Page 1).
The budget allows a 10 percent increase in wages for teachers and doctors 's the two groups which have been most outspoken over wage increases 's falling well short of their demands.
For Fatherland and Freedom, a nationalist party and minor member of the ruling coalition, is particularly unhappy about the new budget. "The general answer is that the budget does not have a good social net," the party's press department said.
The party has noted that it will, however, support the budget proposal in the first reading.
For Fatherland and Freedom is in danger of losing ministerial positions in a highly anticipated government reshuffle due to take place between the first and second readings of the new budget. Prime Minister Aigars Kalvitis has refused to confirm the party's new candidate for economy minister and has criticized the performance of the previous minister, Juris Strods, a member of For Fatherland and Freedom.
The press department noted that depending on the outcome of the government reshuffle, the party may change their position on the budget proposal.
The new budget envisages a 1 percent surplus. The proposed surplus is 0.6 percent higher than outlined in the 2007 budget, but is still only half of the central bank's recommended 2 percent surplus for 2008.
Along with the 2008 budget, on Oct. 8 the government also approved a fiscal strategy for 2008-2010 which envisages a 1.2 percent surplus in 2009 and a 1.5 percent surplus in 2010.
Before the budget plan was released, there was widespread political rhetoric from the prime minister and the president over the country's need to reduce expenditures in order to fight rapidly growing inflation.
"Obviously, we have to reduce spending for at least a year and cut expenses considerably to stop the process," President Valdis Zatlers said in an Oct. 1 interview with the popular morning television program "900 seconds."
"Everybody must participate and everybody must reduce expenditures," the president said.
During a separate Oct. 1 interview, Kalvitis urged people to avoid unnecessary spending to prevent domestic consumption from growing further.
The government hopes that the new budget will complement the anti-inflation plan approved in March. The Finance Ministry confirmed that the government's projected inflation would fall to around 6.9 percent next year.
Saeima (Latvian parliament) will hold the first reading of the budget during an extraordinary meeting on Oct. 31, and the final reading during a Nov. 22 meeting.
