Latvia economy: Cutting costs to survive.

Living within one’s means is a sound economic principle that few individuals as well as countries follow, as a matter of rule. Latvia, it would appear, is trying to implement this principle, to put its economy back into shape.

One of the East European countries, that has, for long, lived under the shadow of Big Brother, the earstwhile Soviet Union, is slowly setting its economy on the right track after being hit by the economic crisis.

Among the major industries of Latvia are transport equipment and systems, agricultural machinery, fertilizers, processed foods, etc. Latvia exports textiles, foodstuffs, wood products, etc., and imports fuels, chemicals, etc.

Presently, the country is engaged in the exercise of balancing its budget to strike a balance between what is necessary and that which can be avoided. Not an easy task given the competing priorities, if not other considerations.

For example, there are differences between the Prime Minister of the country and his Finance Minister on the scope and nature of the budget cuts. Whereas the Prime Minister believes that budget cuts in the region of LVL 275.00 million would be sufficient in 2010, the Finance Minister is of the opinion that the cuts should be in the region of LVL 500.00 million.

However, there is consensus about the areas that should be spared budget cuts, viz, health care, Government debt repayments, and contribution to the Euro budget. The areas of contention, among others, are defense, social spending, environment, culture and sports, public administration, etc.

The problem, it would appear, is that the country has clubbed contrasting areas of concern like defense and social spending together, that is apparently causing a lot of confusion, in determining the size of cuts in the respective budgets. Perhaps, the country should re-work its priorities.