Latvia agrees budget cut goal

Latvians have protested against tax rises

Latvia's government has agreed to cut its budget deficit in 2010 in order to meet targets agreed with the European Union (EU) to secure rescue loans.

Spending will be cut by 320m lats(£425m; $673m) and revenues raised by 180m lats to reach a 500m-lats target.

This was the adjustment it agreed with the EU in exchange for 7.5bn euros ($11bn;£6.9bn) of emergency loans.

Prime Minister Valdis Dombrovskis told the BBC last week that he hoped this would be the outcome of the meeting.

Housing plan

Latvia needs EU financial support, which also includes contributions from the International Monetary Union and the Swedish government, because it has been hit hard by the global recession.

Its economy contracted at an annual rate of 18.7% between April and June, while its unemployment rate soared in August to 18.3%, the highest in the European Union after Spain.

The EU's European Monetary and Economic Affairs Commissioner, Joaquin Almunia, is due to visit Riga to discuss the continuing problems.

Mr Dombrovskis - who has ruled out devaluing the currency - has proposed a scheme that would see Latvian homeowners behind on their mortgages only being liable for the value of their property, rather than the level of their outstanding loan.

After Monday's meeting, he said that he would meet Latvia's commercial bank association later this month to discuss how to protect creditors.

The proposal has angered the Swedish government, whose banks dominate the sector in Latvia.