RIGA, June 18 (Reuters) - Latvia can expect a decision from the European Union on releasing a further 1.2 billion euros in loans before the end of the month, European Economic and Monetary Affairs Commissioner Joaquin Almunia said on Thursday.
Latvia has cuts its 2009 budget by 500 million Latvian lats, including reductions in state salaries of 20 percent and in pensions of 10 percent in order to win further loans from the EU and IMF to avoid state bankruptcy and a possible currency devaluation.
Almunia told Latvian public radio he hoped the decision from the EU would be positive and that it "will be agreed in the coming couple of weeks, before the end of June".
He said the loan for the Baltic state would be discussed at a EU summit, which takes place on Thursday and Friday, and then by finance ministers of member states.
He reiterated that the Commission supported the Latvian
desire to retain its currency peg
"I think this is the best option and that any other option brings very negative consequences," Almunia said.
"We are working for the succeess of a strategy of adjustment that preserves the peg of the lat," he added.
He said Latvia could aspire to join the euro zone in 2013, in line with government expectations.
The government has already come under pressure due to its tough decisions and the health minister resigned on Wednesday after refusing to carry out spending cuts.
Unions are to hold a protest later on Thursday.
Latvia got into trouble after its economy went into a deep slide following several years of strong growth.
Budget revenues have slumped and the deficit will be about 11 percent of gross domestic product (GDP) this year, even with the budget cuts, the government has said.
(Reporting by Patrick Lannin; Editing by Kim Coghill)