Concerning budgetary consolidation the Latvian authorities are committed to achieving a 2010 deficit target of no more than 8.5% percent of GDP in ESA95 terms and a fiscal deficit of no more than 6 % of GDP in ESA95 terms in 2011. Preliminary estimates suggest that a further LVL 395-440 million in net measures will be needed to achieve the 2011 target. The authorities are also considering increasing appropriations from the EU Structural Funds and Cohesion Fund by LVL 250 million next year, which would require an additional LVL 30 million in measures to offset the increased co-financing needs. For 2012 further significant adjustment will likely be needed to bring the deficit below the 3% of GDP target. For the 2011 budget, preparatory work is well underway to identify a menu of options for the new government to reduce the deficit to no more than 6% of GDP. The 2011 budget will only be finalized after Parliamentary elections in October; however, preparing a menu of options for expenditure cuts and possible tax increases by end- October will enable the new government to quickly submit a budget for Parliamentary approval. Thus far, possible measures with an aggregate yield of around 3% of GDP have been identified. The final menu will include more measures, and will be significantly larger than the consolidation needed, to give the incoming government a meaningful choice of measures.
