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Latvian court blocks salary freeze for judiciary

18 January 2010, 18:00 CET
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(RIGA) - Latvia's top court on Monday struck down a wage freeze for judges, dealing a blow to the government's austerity drive to meet the terms of the EU and IMF-led bailout for the crisis-struck Baltic state.

"Because it violates the principle of the independent judiciary and disproportionately limits the financial security of judges, the challenged law violates Article 83 of the Constitution," Latvia's Constitutional Court said.

The challenge was brought by more than 100 judges after parliament approved wage freezes for the judiciary in December 2008, part of the 2009 budget cuts designed to meet the terms of the bailout agreement with international lenders.

The court ruled the wage freezes to be unconstitutional, stating its judgement would take effect starting January 2011, but did not make its ruling retroactive saying this could have "negative consequences" for Latvia's budget.

Judges in Latvia earn an average of 808 lats (1,154 euros, 1649 dollars) per month, on par with the 2005 level.

Last month, the government suffered the first blow to its austerity drive when the court struck down pension cuts, forcing it to scramble to find more than 100 million lats (140 million euros, 201 million dollars) to pay back pensioners lost income.

It was not immediately clear what impact the ruling would have on the international rescue package that has been keeping Latvia afloat or how the country's embattled centre-right government would meet the challenge.

The government faces a vote on the international lending agreement in the parliament on Thursday.

The number of people who do not want their wages cut is growing, Vyacheslav Dombrovsky, an economist at the Stockholm School of Economics in Riga told AFP.

"Now you have one more player that wants others' salaries to be reduced and not theirs. Given the number of such players already, it hardly makes much of a difference," he said.

With unemployment soaring, Latvia is in the middle of one of the steepest recessions in the 27-nation European Union. Its economy was expected to shrink by up to 18 percent in 2009 -- a far cry from the double-digit boom it enjoyed after joining the EU in 2004.

Its fractious coalition government has over the past year been raising taxes and slashing public services as it tries to stick to the terms of a 7.5-billion-euro (10.7-billion-dollar) bailout agreed at the end of 2008 with lenders including the International Monetary Fund and the EU.

Under the deal, Latvia pledged to cut 500 million lats (702 million euros, 1.0 billion dollars) each year until 2012.

Latvia, a country of 2.2 million people, broke from the crumbling Soviet Union in 1991. Its overheated economy withered in 2008 as a credit bubble burst and the global crisis struck.


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