Bloomberg News

Latvia May Agree With Lenders Over End of Program This Week

December 07, 2011

Dec. 7 (Bloomberg) -- Latvia may reach agreement with international lenders to end a 7.5 billion-euro ($10.1 billion) lending program this week, Prime Minister Valdis Dombrovskis said.

“I think talks will be closed this week,” said Dombrovskis on the Latvian Independent Television program 900 Seconds today. Talks have been delayed due to the liquidation of Latvijas Krajbanka AS, the sixth-biggest deposit bank, said Dombrovskis.

Latvia turned to a group led by the European Commission and the International Monetary Fund for a loan in late 2008 after the country’s second-biggest bank needed a state rescue and a real estate boom turned bust. The government submitted the 2012 budget to parliament yesterday which plans to lower the deficit to 2.5 percent of gross domestic product next year so the country can qualify for euro adoption two years later.

Dombrovskis rejected criticism from Latvian Central Bank Governor Ilmars Rimsevics who yesterday said a growth estimate of 2.5 percent used in next year’s budget is “too optimistic.”

“I can’t agree with this evaluation,” said Dombrovskis today. “This macroeconomic estimate for which the budget is based on was also coordinated with the Latvian central bank.”

Including next year’s budget measures, Latvia will have passed spending cuts and tax increases of 2.3 billion lati ($4.4 billion), or 17.8 percent of GDP, since 2008, Finance Minister Andris Vilks told a news conference on Dec. 5.

--Editor: Douglas Lytle

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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