Latvia cuts pensions, salaries to avoid bankruptcy

The Latvian government has agreed to slash pensions and state sector salaries in a bid to keep the country afloat financially. Riga must cut costs to qualify for more financial aid from the EU and the IMF.

Latvia's prime minister says last-minute state budget cuts have saved his country from bankruptcy. The country is seeking to avert the possible devaluation of its struggling currency, and it needs to reduce budget shortfalls in order to qualify for crucial financial aid from the European Union and the International Monetary Fund.

The country has been particularly hard hit by the current recession, and is facing an economic contraction of up to 20 percent this year.

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