Latvia to cut pensions to avert currency devaluation

LATVIA&rsquo;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.<br /><br />The five-party coalition government, led by Prime Minister Valdis Dombrovskis, agreed with unions and employers on ways to find savings of 500m lats (&pound;602m) to win further loans from the International Monetary Fund and the European Union.<br /><br />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.<br /><br />&ldquo;It was a difficult decision and it will not be popular but it had to be done,&rdquo; said Valdis Dombrovskis after a marathon 12-hour meeting.<br /><br />He added: &ldquo;Our decision is sending a signal to the EU that we are serious.&rdquo;<br /><br />Dombrovskis said a devaluation of the lat currency in crisis-hit Latvia would mean more pain than the planned budget cuts.<br /><br />The move is aimed at winning a further &euro;1.2bn (&pound;1bn) of funds from a &euro;7.5bn IMF and EU rescue package.