Sebastian Aguirre
IMF Keeps Hard Line On Latvian Budget
IMF Keeps Hard Line On Latvian Budget
Power is defined as the ability to influence
another person or group of people to act in your favor. Capability is the way to get or to acquire
the power. For example, tax in cigarettes is one way to maintain in lower
levels the population that smokes, because cigarettes are more expensive and
less part of the population can pay for them.
In 2010,
Latvia had to cut the budget’s deficit. The International Monetary Fund said
that the country needed a fiscal consolidation. Valdis Dombrovskis promised not
to cut the wages in the public sector. According to Nathan Greenhalgh, the author
of this article:
“Latvia was forced to take a three-year €7.5
billion bailout from the IMF and EU in 2008 after nationalizing the insolvent
Parex Bank. Now the already stripped national budget faces a 400 million lats
(€564 million) deficit reduction.”
The capabilities used by Latvia to reduce the
budget’s deficit were to cut to 8.5 percent of the gross domestic product deficit
in 2010, to 6 percent in 2011, and to 3 percent in 2012. Latvia faced one of
the deepest economic problems in 2010, it was “worst-performing in the world
this year after Haiti”, according to the International Monetary Fund.
In my opinion I think that the International Monetary
Fund and European Union take the correct decisions for Latvia. Latvia had a difficult
time because it had to reduce the budget’s deficit to have an opportunity to
pay the three year €7.5 billion bailout. The capabilities used by Latvia were
the correct; reducing the budget’s deficit every year, starting to cut it to
8.5 percent of the gross domestic product.
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