Joaquín Almunia, the European commissioner for economic and monetary affairs, today called a new budget presented this week by the Latvian government a “first step” towards fixing Latvia’s public finances.Almunia added, though, that further steps were needed to reduce the country’s budget deficit, which currently stands at around 9% of its gross domestic product. The new budget presented this week by the Latvian government contained a series of public spending cuts and tax increases. Despite those changes, the Latvian government yesterday failed to find enough buyers to fully subscribe an auction of 50 million lats (€70.49m) of sovereign debt. The government is believed to be considering devaluing the lat as an emergency measure to help the economy, which is expected to contract by 15% this year.The Commission and the International Monetary Fund are currently assessing whether Latvia has met budgetary conditions that would enable them to release the next tranche of funds from a €7.5 billion support package created for Latvia.As part of that package, EU member states agreed in January to grant Latvia a €3.1 billion loan from an EU fund used to help non-eurozone countries facing balance-of-payments difficulties. Under the terms of the package, Latvia agreed to strengthen its banking sector and correct fiscal imbalances.During the crisis, the EU has also granted Hungary and Romania loans to help them improve their balance of payments.