Dombrovskis: Budget consolidation - effective anti-crisis measure

  • 2011-12-27
  • TBT Staff

Valdis Dombrovskis says that the crisis has taught Latvia several lessons

RIGA - Latvia has concluded its international loan program, and Prime Minister Valdis Dombrovskis has compiled the most valuable lessons learned during the crisis, reports LETA. According to the prime minister, budget consolidation is an effective anti-crisis measure, whilst devaluation can be avoided and is not needed.

Last week, Dombrovskis outlined that the crisis has taught Latvia several lessons. The introduction of the euro is a goal with clearly defined criteria. Expenditure cuts are better than tax hikes, while international aid must be sufficiently considerable to restore trust on international markets, even though some adjustments can be done gradually. Larger initial steps ensure better results, whilst governmental changes and different ruling coalition parties are surpassable if the country needs to carry out significant reforms.

Commenting on Latvia’s further development and future challenges, Dombrovskis pointed out that it is necessary to implement strict fiscal discipline, ensure competitiveness and sustainable growth, conclude budget consolidation, limit inflation, combat shadow economy, reduce unemployment and introduce the euro in 2014.

As reported, on Dec. 21, Latvia officially concluded its three-year international loan program, during which the country implemented stringent austerity measures to stabilize its finances after the economic downturn.

The final memorandum regulating the European Union’s financial assistance was signed last Wednesday. The board of the International Monetary Fund (IMF) also supported the conclusion of Latvia's international loan program.

The European Commission’s loan program will formally be concluded on Jan. 20, 2012, because the commission’s final loan installment will be received on this day, a month later than the final loan installment from the IMF.