Latvia Agrees to Lower Minimum Benefits, Ignoring IMF Warning

Latvia agreed to cut government payments to people without income and unemployment benefits, ignoring warnings from the International Monetary Fund that the move may threaten economic growth.

Prime Minister Valdis Dombrovskis and Andris Jaunsleinis, chairman of the Union of Municipalities, signed an agreement today in the capital, Riga, to lower the guaranteed minimum income for the country’s poorest from 45 lati ($83) a month to 35 lati starting next year, according to the Cabinet’s website.

Latvian unemployment, which stood at 16.1 percent in June after peaking at 20.5 percent in 2010 as a recession erased more than a fifth of economic output, is only worse in Greece and Spain within the European Union, according to Eurostat. The government should wait for a study on long-term unemployment before cutting benefits as the move “could worsen inequality and undermine growth,” the IMF said in a July 16 statement.

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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