From Agence France-Presse
Latvia sees no devaluation, euro entry in 2013 soonest: PM
03 June 2009, 18:48 CET
(RIGA) - Latvian Prime Minister Valdis Dombrovskis said Wednesday his crisis-hit country would adopt the euro in 2013 at the earliest and strongly ruled out a devaluation of the Latvian currency for social reasons.
"The devaluation solution is even more painful than the solution to cut the budget," Dombrovskis told Latvia's Diena daily Tuesday.
"Now we're discussing how we can protect the pensioners and others because a devaluation would affect every layer of the society simultaneously."
Latvia could adopt the euro in 2013 at the earliest, Dombrovskis added, contradicting the central bank's push to join the 16-nation eurozone in 2012. "This rhetoric about introducing the euro in 2012 can be heard very often. It is not really clear to me on what it is based," he said. "The soonest (date to join euro) is 2013," he said.
A Baltic nation of 2.3 million, Latvia warned on Monday that its economy was set to contract by 18 percent this year -- the worst in the 27-member EU -- and overspending will soar to 9.2 percent of output, despite deep spending cuts.
This public deficit figure is nearly double 5.0 percent agreed with international lenders.
The Latvian economy is being reviewed by the International Monetary Fund.
Latvia sought IMF approval to run a 7.0-percent public deficit, instead of the 5.0 percent agreed in December as part of a 7.5-billion-euro (10.5-billion-dollar) rescue package.
If parliament fails to adopt the amended budget, Latvia would not receive the next 1.2 billion euro installment of the IMF loan, Dombrovskis told Diena.
"If there are no budget cuts, then we'll have problems, one can say, big problems," he said.
"We will receive the loan only after we adopt this budget. The Parliament will start playing with this budget and it will be the most incorrect what one can do unless one has some kind of a hidden goal - to go through with this devaluation or something like that."
The 100-member parliament started debate on the draft budget Wednesday and was expected to vote on it during a final reading on June 17.
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