Latvia: Danske Becoming Concerned ...

Well, I thought they have been concerned for years ...

Danske Bank writes in its EMEA Daily today:

This week has brought numerous comments from both the Latvian government and the EU on the Latvian crisis. Yesterday, comments from EU Commissioner Almunia and Latvian Prime Minister Dombrovskis (again) indicated that Latvia will get the next instalment on its IMF/EU loan. However, there are several reasons why we are becoming concerned that things might not be as simple as both Dombrovskis’ and Almunia’s comments might indicate. The main reason for our concerns is the deafening silence of the key player in all this – the IMF. The IMF could simply state that money would be forthcoming if the Latvian parliament on Friday passes the revised 2009 budget, but they have so far said nothing. And if the payment of the next instalment on the EU/IMF loan is a done deal, why did Dombrovskis state yesterday that the Latvian government was working on a "bridging loan" as an alternative to the EU/IMF loan?

SEB had an Instant Insight post yesterday with details on the forthcoming actions:

The road to parliaments vote on Latvian budget.

-The Latvian government, the President of Latvia and social partners agreed on amendments to the 2009 budget expenditures cut by LVL 500 M
-It has been agreed upon with the Latvian Employers Confederation, the Chamber of Commerce and Industry, the Latvian Confederation of Free Trade Unions and the Latvian Association of Local and Regional Governments.
-The expenditure has to be cut by 1.5 billion lats by 2011 or by 500 million lats per year, starting in 2009.
-LVL 500M must be saved in remaining 6 months of 2009.
-Exact details will be revealed on Thursday.
-The goal for the severe spending cuts in 2009-2011 is a 3% fiscal deficit in 2011 and euro introduction in 2012/13.
-The goal would be reached by hiking taxes and lowering wages and social benefits/pensions.
-Continuing of structural reforms based on functional audit, the IMF/EU/WB recommendations.

What will happen this year?
-Additional cuts for ministries, agencies for investments, purchases, etc.
-Salaries in public sectors down by 30-40% from the level of 2008 (-120 m LVL economy on salaries in the public administration).
-Cut of pensions by 5-15%
-Cut of non-taxable minimum income by half (from LVL 90 to 45 ) and minimal wage by 22% (from LVL 180 to 140 ).
-Maintenance of co-financing for implementation of the EU funds.
-Increase of excise tax for beer.

In 2010
-Introduction of progressive personal income tax (details unclear, but max could be 30%)
-Introduction of new property tax (property, living property, land). Possible taxation of all inhabitants.
-Introduction of tax on capital gains
-Income tax for individual enterprises up from 15% to 23%.
-Another possible hike of excise tax (all items in that group).

In 2011
-VAT from 21% to 23%
-Social tax from 34% to 37%

What's next
-Details in all positions regarding to those cuts by LVL 500M will be presented in extraordinary Government's session on Thursday, June 11
-2nd reading in Parliament the next day
-Continuing of the 2nd reading, voting on Wednesday, June 17
-All coalition parties plus opposition's First party will vote for.
-Money tranche of EUR 1.2B will be delivered in coming 2-3 weeks

Bridging loan? I thought Almunia is ready to discuss the size of gifts ...