RIGA - International lenders are reportedly pushing Latvia to implement a progressive tax to help the country keep its budget deficit low.
Latvian parliament (Saeima) is due to discuss the budget in its first reading on Thursday. The budget, which was submitted earlier this week following months of political wrangling, is widely seen as Latvia's only chance to maintain international confidence.
"This will be extremely important to increase confidence in the marketsvis-a-vis the Latvian economy," he told a news conference in Riga," EU Economy Commissioner Joaquin Almunia said in a Riga press conference last month in reference to the country's need to slash the deficit.
"If this 2010 budget is adopted as it has been agreed, this will createthe conditions to have again positive figures for growth in the Latvianeconomy before the end of 2010," he said.
Latvian Prime Minister Valdis Dombrovskis said Tuesday that lenders have already raised concerns about the lack of a progressive tax, arguing that the fund-raising scheme is too short term and will not promote the goal of an eventually stable economy.
The prime minister said Wednesday, however, that he thought the budget meets the countries promises to lenders, whose primary concern had been that the country slash an additional 500 million lats from the budget.
If the parliament fails to pass a national budget in the second reading, due early next month, then it will necessarily lead to the collapse of the government.