October 10, 2009 / 3:25 PM / 10 years ago

Soros says EU "wrong" to push austerity on Latvia

STOCKHOLM (Reuters) - Billionaire investor George Soros blamed the European Union on Saturday for not doing enough to help Latvia, one of the bloc’s most damaged economies, recover from the financial crisis and return to growth.

The Baltic country, an EU member since 2004, is trying to meet the terms of a 7.5 billion euro ($11.06 billion) rescue package agreed with the EU and the International Monetary Fund.

Sweden, one of the bailout’s main contributors, this week criticized its neighbor in a series of public comments for backtracking on promises to cut public spending.

But George Soros, famous for making a fortune on currency markets, said that this approach was wrong.

Without help from foreign lenders and more leniency on its budget, Latvia’s currency peg with the euro would break, he said in an interview broadcast on Swedish public radio on Saturday.

“The pressure for them to reduce government spending — the problem is in the private sector — is the wrong kind of policy, which ought to be avoided,” he said.

“I think that the European Union countries ... ought to help Latvia more than they are currently doing.”

Asked if he thought the EU was misguided in urging austerity measures, Soros said: “Yes, I think that is the wrong policy,” adding that Latvians had already made enough sacrifices to maintain their currency peg.

Foreign lenders, led by Sweden, have urged Latvia to cut public spending by 500 million lats ($1.04 billion) in its 2010 budget, but so far the country has only promised 325 million lats of cuts.

The shortfall provoked sharp criticism this week from the prime minister and central bank governor of Sweden, where banks are heavily exposed to Latvia through bad loans.

On Friday, the International Monetary Fund said it had held “fruitful” discussions with Latvia about the budget.

Separately, Latvia’s prime minister said on Saturday that he was planning more measures to win approval from international lenders.

The measures, he said, would be discussed with the European Commission next week.

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