Court may block further spending cuts

RIGA - Prime Minister Valdis Dombrovskis (New Era), in an interview with the Latvian State Radio ‘Program 4,’ said he believes that further deficit reduction will be achieved through spending cuts rather than tax increases, reports news agency LETA. The prime minister indicated that up to now, Latvia has been on “the road of reductions in budget spending,” and that in the preparation of the next state budget, too, he would prefer to further reduce the budget deficit largely through curbing expenditures.

Dombrovskis then pointed out that it would be good to avoid a rise in tax levels, but if the government will not be able to sufficiently reduce spending - and the Constitutional Court believes that the government will not be able to do so - then it will be necessary to make further cuts in the master budget or to examine the current tax policy. “None of the versions is being abandoned,” he said.

The premier admitted that the latest Constitutional Court decisions have only increased future budget reductions. For example, although judges themselves have decided that their salaries cannot be reduced, Dombrovskis pointed out that this question would still have to be discussed, as in his view the government acted correctly and reductions were made proportionally in all sectors. Much will depend on whether judges are able to find solidarity with other sectors, he said.

Technical preparations for the 2011 budget are going ahead now, although the political decision on the budget will have to be made by the next government, stressed Finance Minister Einars Repse (New Era). Repse pointed out that in the next two state budgets, the deficit will have to be reduced by up to 900 million lats (1.2 billion euros), the largest portion of which will have to be cut in the 2011 budget.