RIGA - The International Monetary Fund (IMF) is calling for Latvia to review its pension system in efforts to reduce its planned budget deficits as it continues negotiating over the next disbursement of international loans. The government says it does not plan to reduce pension levels further and will try to protect the socially more vulnerable parts of the population, says political party New Era's leader Solvita Aboltina, reports Latvian news portal Delfi.
The IMF also suggests for Latvia to revise the tax system, but on this issue as well the government promises not to give in too much as it wants to protect industry. Aboltina notes that it doesn't seem possible to increase tax rates without directly affecting the business environment.
This means that, in order to achieve the planned budget spending cuts, changes could be made elsewhere, including in the social budget. Informal discussions to raise revenue bring up ideas such as an increase in the retirement age.
The IMF's main priority, in ensuring Latvia's continued receipt of the international rescue package of loans worth 7.5 billion euros, is to see that the government prepares next year's budget promising an 8.5 percent deficit. Aboltina emphasized that the government's main task under current circumstances is to protect socially vulnerable people, while using all possible efforts to get the economy going again.
Prime Minister Valdis Dombrovskis in an interview on LTV's program 'Good Morning, Latvia!' on July 14 acknowledged that IMF requirements for Latvia have been more ambitious, both in fiscal and tax policy, but he expressed hope for an agreement. "I think we will manage to agree on similar requirements as [was agreed] with the European Commission," said Dombrovskis.
Moves to slash into social spending however are creating a stir among pensioners, who are facing cuts in what are already meager state support payments. Taking the legal route, the pensioners are taking their grievances to court. The Constitutional Court on July 17 started proceedings on the first two cases on pension cuts for working retirees, reports news wire service LETA.
The Court, which has been inundated with more than 5,000 complaints filed, has declared it will not provide individual replies to each of the cases any longer, says the Constitutional Court chairman's aide Lina Kovalevska.
The petitioners will be heard en masse instead as the thousands of complaints will be attached to the materials in the case, thereby allowing their opinions to be taken into consideration, Kovalevska remarked. The reason given for this change is that listening to each petition would take up too much of the Court's time and resources.
The Constitutional Court will also take up the question of whether amendments to the Pension Law are in conformance with the Constitution's Articles 1, 91, 105 and 109, and whether they discriminate against pensioners. This issue was brought up by petitions contesting the provision of the amendments, which said that employed or self-employed pensioners will have their pensions reduced 30 percent from July 1 this year, to December 31, 2012.
Article 109 of the Constitution states that 'Everyone has the right to social security in old age, for work disability, for unemployment and in other cases as provided by law.'