Latvia to cut pensions to avert currency devaluation
LATVIA’S government said it will reduce old age pensions and public sector salaries but not raise taxes as it tries to head off currency devaluation.
The five-party coalition government, led by Prime Minister Valdis Dombrovskis, agreed with unions and employers on ways to find savings of 500m lats (£602m) to win further loans from the International Monetary Fund and the European Union.
The moves will include a cut in old age pensions of 10 per cent, a whopping 70 per cent cut in the pensions of those who still work, and a 20 per cent cut in state sector salaries.
“It was a difficult decision and it will not be popular but it had to be done,” said Valdis Dombrovskis after a marathon 12-hour meeting.
He added: “Our decision is sending a signal to the EU that we are serious.”
Dombrovskis said a devaluation of the lat currency in crisis-hit Latvia would mean more pain than the planned budget cuts.
The move is aimed at winning a further €1.2bn (£1bn) of funds from a €7.5bn IMF and EU rescue package.