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Brussels, 16June 2009

Joint statement by the Presidency of the Ecofin Council and the Commission on the fiscal package adopted by the Latvian Parliament

The Presidency and the Commission welcome the new fiscal package for 2009 and 2010 adopted by the Latvian Parliament today, which is a courageous and ambitious step forward to address fiscal imbalances. In particular, we commend the support given by social partners to the package. This shows that there is awareness and commitment amongst key stakeholders on the need for bold action in the current difficult economic situation, which is crucial.

We stress that implementation and full delivery of the measures is necessary to achieve the budgetary consolidation foreseen for 2009 and 2010 (amounting to about Lat 500 million or 4% of GDP per year). While the urgency to act in the current situation may warrant to some extent the recourse to one-off measures in 2009, work on permanent measures to reduce the budget deficit in a sustainable way and improve the competitiveness of the economy in 2010 and the following years should start immediately. In this context, the decision taken to ring-fence the co-financing of EU structural funds is important as it ensures access to EU financing that will be used for productivity-enhancing expenditures. Building on the current fiscal package, it is crucial that Latvia develops a credible medium-term budgetary strategy aiming at bringing the deficit below the 3% of GDP Maastricht threshold by 2012.

The budgetary measures adopted today will be assessed thoroughly in the next days, based on an analysis of the European Commission, in close co-operation with the IMF and together with the Latvian authorities. Following this, a decision on the disbursement of the second instalment of the EU balance-of-payments assistance will be taken without delay.

Commenting on the vote, European Economic Affairs Commissioner Joaquín Almunia said:

I very much welcome the vote by the Latvian parliament and the support given by the social partners to the package of budgetary savings. This is necessary to reduce the deficit to levels that are consistent with the need to overcome the present difficulties with the financial help of the EU and other contributors. The reduction in the deficit will have to continue in 2010 and in the next years, so as to anchor the economy in a credible and sustainable path. This should be done while preserving social fairness and avoiding that the cost of the adjustment falls on the most deprived parts of the population."

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