Latvia braces for tough budget cuts

Latvia has had an especially grim time during the global economic crisis, and government ministers have been meeting to work out what to slash from the country's budget.

The government has agreed to cut its budget deficit in 2010 in order to meet targets agreed with the European Union to secure rescue loans. Spending will be cut by more than $670m.

Last year, the government got an $11bn dollar bailout package from international lenders, but the economy is still likely to shrink by almost 20% this year.

Neil Shearing is the Emerging Europe Economist at Capital Economics, in London. The BBC's Roger Hearing asked him how Latvia got into its predicament in the first place.

First broadcast on World Business News