Dombrovskis told Bloomberg that Latvia will look to revenue from the sale of Citadele to help reduce its budget deficit. Photo by the Latvian State Chancellery.

RIGA — Latvian Prime Minister Valdis Dombrovskis promised that the government will not institute additional large-scale wage cuts to reduce its budget deficit as required by international lenders.

After reducing public sector wages by 20 percent as part of wide-ranging fiscal consolidation measures, Dombrovskis said the required 400 million lats (€564 million) deficit reduction for the 2011 national budget will not be achieved with additional wage cuts in an interview with Bloomberg this week.

”We do not intend to go for any massive additional wage reduction in the public sector,” Dombrovskis said.

Dombrovskis acknowledged that given that this is an election year, promising no wage cuts is popular.

Instead, Latvia is looking to gain that revenue from from the sale of its shares in Citadele Bank, the solvent offshoot of the nationalized Parex Bank.

Dombrovskis said that after the 2011 budget is passed is “an appropriate time to go for the first attempt to sell the bank.”

Dombrovskis has said in earlier interviews that the state may be able to reach a budget deficit at 8.5 percent of GDP with less cuts, as the economic recovery from the crisis will increase tax revenue. The budget consolidation — or expenditure cuts plus revenue increases — might comprise only 250 million lats (€350 million) instead of the 500 million lats originally envisaged.

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