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Latvia's government discussed tough choices on Thursday to find 500 million lats ($1.01 billion) in savings this year and win further loans to stave off a currency devaluation and economic collapse.
Ratings agency Moody's expected a devaluation to be avoided, but said economic pressure on the small Baltic state of 2.3 million people would persist.
- Special Report: Eastern Europe on the Edge
The lat currency stayed firm, but dealers said the money market was in a state of coma after central interventions to support the lat drained it of liquidity.
"The government will discuss many proposals regarding budget cuts," said the spokeswoman for Prime Minister Valdis Dombrovskis after the cabinet meeting began.
Dombrovskis has said he expects parliament to pass the budget cuts on June 17, which would lead to Latvia wining a further 1.2 billion euros of funds from a 7.5 billion International Monetary Fund and European Union rescue package.
The constant search for cuts has ramped up worries that the fiscal clampdown will only intensify an economic contraction forecast to reach 20 percent this year. Tax evasion is also seen as a growing risk.
The chairman of the largest party in Latvia's five-party ruling coalition said it would back the cuts despite misgivings about how these had been drawn up.
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