Latvia draws red line on EU budget

(RIGA) - Latvia said Tuesday that it cannot back plans for the European Union budget in their current form, ahead of what are expected to be gruelling talks on the 27-nation bloc's spending plans.

"Although Latvia is ready to constructively seek a solution towards achieving an agreement, the possibility to agree seems remote at the moment, because the financing proposal by the President of the European Council is unacceptable for Latvia," Foreign Minister Edgars Rinkevics said in a statement.

"Latvia cannot vote in favour of that," he underlined.

EU president Herman Van Rompuy wants toreduce the EU's 2014-2020 budget by 75 billion euros ($95 billion), and a summit this week is threatening to turn into a showdown between older wealthier EU states and poorer members on its southern and eastern fringe.

With two million people, former Soviet-ruled Latvia is one of the smallest member states.

Having joined the bloc in 2004, it is a net beneficiary of the EU budget and relies on European "cohesion funding", or aid to help poorer members catch up with the more advanced member states and thereby smooth differences across the bloc's single market.

EU members are struggling to rein in spending and overcome an economic crisis sparked by the eurozone's crippling debt problems.

That situation is only too familiar in Latvia, which has emerged from the world's deepest recession and has been hailed by austerity supporters as an example of using cuts to cure an economy.

Rinkevics said Latvia had two "red lines".

Cohesion funding must remain at least at its current level, he said.

And Latvian farmers -- the lowest-paid in Europe under the EU's Common Agricultural Policy -- must have a level playing field, the foreign minister added.

The Common Agricultural Policy is a system of EU subsidies to farmers, but east European nations complain that western Europe's agricultural sector gets an unfair share.

"An agreement will not be possible unless those needs are respected," Rinkevics warned.