RIGA — Just when Latvians thought they had seen a light at the end of the tunnel with budget negotiations, the government says that it will have to make another batch of expenditure cuts and possible tax hikes.

Prime Minister Valdis Dombrovskis told journalists Monday that the government would have to consolidate the budget by another 55-60 million lats (€77-84 million) since the size of the budget deficit still did not satisfy international creditors.

The prime minister said coalition parties were discussing various ways to meet the target, and for now it wasn’t clear whether higher taxes or more cuts would be the focus of the new consolidation.

The announcement comes as the Latvian parliament is negotiating the 2010 budget. Lawmakers approved the budget in a first reading earlier this month, and they are expected to pass it in a second and final reading in early December.

News that Latvia’s government will have to raise taxes or cut the already threadbare expenditures will undoubtedly spark a new wave of criticism and further batter political ratings. It will also trigger more speculation about whether the Dombrovskis government can survive once the budget is passed.

On Saturday Ainārs Šlesers, deputy mayor of Riga and leader of the Latvia’s First Party/Latvia’s Way union, an opposition party, called for the “overthrow” of the current government. Though many observers regard this as populist rhetoric, some believe Slesers’ words signal the start of an effort to establish a new government that would guide Latvia to the next national elections in October 2010.