The financially-troubled Baltic state of Latvia saw a bail-out agreement with the International Monetary Fund (IMF) hit trouble Monday when the largest of five parties in the ruling coalition government said it was not ready to back the deal, according to dpa. The decision by the People's Party leaves a 7.5-billion-euro (10.6-billion-dollar) economic bail-out package brokered by the IMF and involving the European Union, World Bank and regional governments hanging in the balance. A letter of intent confirming the deal was to be signed Monday in Riga after a meeting of coalition partners. However, shortly after the meeting began, People's Party members said they were not prepared to sign - yet. "We require detailed and honest answers from the prime minister on various questions," a People's Party statement said. Prime Minister Valdis Dombrovskis later confirmed that four out of five coalition partners had signed and that he would meet the People's Party on Monday evening in his efforts to win their support. The People's Party statement listed seven points of concern ranging from next year's budget to the future of nationalized bank Parex. By digging in its heels, the People's Party risks wrecking both the deal and an increasingly fragile coalition. Many Latvians hold the party responsible for economic problems that developed during its years in government. Despite being the largest parliamentary party, it was virtually wiped out in recent local elections. Latvian President Valdis Zatlers repeated his Sunday statement that the country needed help from international lenders and described the letter of intent as "a balanced document" that contained "no upsetting surprises." Full details of the agreement have yet to be released, but Dombrovskis said the text would be similar to a memorandum of understanding already signed with the European Union, which gives the EU and IMF an effective right of veto on matters related to government expenditure and calls for much tougher financial oversight. The IMF mission to Latvia extended its scheduled stay in the country by more than a week, as fears grew that the two sides would be unable to find common ground on where future budget cuts would be made. On June 16, the Latvian parliament held an extraordinary session to approve budget cuts worth 500 million lats (1 billion dollars). Similar amounts are due to be slashed in both 2010 and 2011. The cuts have reduced pension payments and wages and led to job losses in the public sector. The IMF has yet to confirm whether it will release a scheduled 200-million-euro payment. Its board of governors can only make a decision on the deal once the Latvian government has signed the letter of intent. A previous payment of the same amount was withheld after the IMF decided reforms were not being carried out in a satisfactory way. The Washington-based organisation also recently expressed concern that Latvia's austerity measures were hitting the most vulnerable members of society. However, there was some good news for Latvia, when Finance Minister Einars Repse confirmed that a 1.2-billion euro (1.7-billion dollar) loan package from the EU had arrived. "This is a positive signal that our international partners welcome this year's budget amendments, but now it is important to work just as hard on the 2010 budget," he said. The Latvian economy is set to contract by at least 18 per cent this year after a decade-long boom turned into a spectacular bust.
