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Friday 11 July 2014

Even IMF says Latvia has gone too far with austerity

Aaron Eglitis

Published 04/01/2013|05:00

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IRELAND likes to think of itself as the best boy in the class but Latvia has paid off its 2008 bailout loan before any other nation.

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Now that the Baltic state has a free hand again because the IMF cannot dictate policy, Latvia has introduced even harsher policies.

This week, Latvia cut spending so much that even the IMF says it's gone too far. A drop in the guaranteed minimum income, which aids the country's poorest, took effect on Monday, two weeks after Latvia paid off the IMF's chunk of a $9.9bn (€7.5bn) rescue loan. The IMF says the changes risk denting the social safety net.

Latvia's recovery from a slump that erased almost a fifth of economic output has split world opinion.

Nobel prize-winning economist Paul Krugman has criticised its austerity measures while some European leaders call them an example for the continent.

"Now that the IMF monitoring has gone, the government has got its way," Alf Vanags, director of the Baltic International Centre for Economic Policy Studies in Riga, said.

The government's benefit-reduction policies, in addition to shrinking a public-works programme, are designed to push Latvians into employment, according to Finance Minister Andris Vilks. (Bloomberg)

Irish Independent

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