Budget cuts spark protest

  • 2009-06-18
  • By Kate McIntosh
RIGA - The Latvian government has announced plans to massively reduce old age pensions and state sector salaries as it fights to stave off economic collapse and rumors of currency devaluation.
At an extraordinary meeting on June 16 the Saeima (Latvian Parliament) adopted amendments to the law which envisage slashing 500 million lats (711.43 million euros) from national budget expenditures.

The move, which followed heated discussions, is a bid to win further aid payments from the International Monetary Fund (IMF) and other lenders, widely seen as the only way to head off the country's deep recession.
The plan includes a cut in old age pensions of 10 percent, a whopping 70 percent cut in the pensions of those still working, and a 20 percent cut in state sector salaries.
Maternity and child care benefits will be slashed 10 percent, while benefits to working parents will be cut in half.

Under its radical new reforms the government also plans to eliminate the tax-exempt minimum income.
The measures are aimed at securing a 7.5 billion euro IMF and EU-led rescue package agreed in December.

The amendments which were endorsed by 63 votes to 30 are due to come into force by July 1.
 "We are well aware that today's [June 16] decisions are very unpopular. However, we are also aware that in the current situation there are no other options and that we, politicians, had to take nationally responsible decisions. After serious and heated discussions in the parliament and negotiations with social partners, the Saeima managed to reach the only possible compromise," said Gundars Daudze, Speaker of the Saeima.

Under planned budget amendments unemployment benefits will be set at 45 lats per month.
Latvia currently has about 128,000 jobless persons, of which only half are receiving unemployment benefits.
The ongoing economic crisis led to speculation recently that Latvia would devalue the lat and that the Valdis Dombrovskis-led government planned to stand aside.

TOUGH BREAK
News of the cuts has sent shockwaves through unions and social advocacy groups, who plan to stage a protest on June 18 in down town Riga.
Protesters are calling for an immediate freeze on planned cuts in the health, education and welfare sectors, saying the budget amendments would punish the country's most vulnerable social groups.
Latvian Free Trade Unions Association (LFTUA) Chairman Peteris Krigers said the cuts would remove the safety net for all Latvia's citizens.

"Already now every year Latvia loses at least 10,000 of its citizens due to the poor quality health care system; we cannot step back any further," said Krigers.
Teachers, who are facing a massive 50 percent cut in their salaries from September 1, are also preparing to take action.

Teachers in several districts have called for the resignation of Education and Science Minister Tatjana Koke and have threatened to strike should the wage cuts go ahead.
At the time of going to press prominent member of the Education and Science Workers Union Ilze Trapenciere told The Baltic Times some teachers also planned to suspend grading of secondary school exams, which ended on June 16. The exams are a requirement of students wishing to enter higher education.

Trapenciere described the government's plan as "absolutely shocking," saying the cuts would return Latvia's education system to a "mid-1980s level or even worse."
"On the one hand the minister is saying that 'no, we must keep these same standards and quality,' which is in my mind is quite impossible," Trapenciere told TBT.
Under the latest cuts, teachers' average gross monthly salary will plummet from 345 lats per month to just 172 lats.
Teachers had previously signed an agreement with the Ministry of Education agreeing to a 20 percent reduction in wages.

It is still unclear if the government plans to introduce a progressive income tax for the first time to replace the current flat tax of 23 percent.
In March the IMF withheld a payment of almost 200 million euros after Latvia's previous government, which stepped down on Feb. 20, failed to set its budget deficit at the agreed 5 percent of gross domestic product.

Dombrovskis has repeatedly warned Latvia faces bankruptcy if it is unable to secure future loan payments.