* Latvia PM-planned budget cuts enough to meet deficit goal
* Says unnecessary cuts would slow recovery, risk unrest
(Adds more PM quotes, background)
By Simon Johnson
STOCKHOLM, Oct 5 (Reuters) - Latvia does not need to make the size of budget cuts demanded by international lenders in order to keep its economic stabilisation programme on track, the country's prime minister said on Monday.
International lenders say the country had agreed to slash 2010 spending by 500 million Latvian lats ($1.03 billion) as part of the terms for a $7.5 billion bailout package led by the International Monetary Fund.
Prime Minister Dombrovskis said that with the economy recovering faster than forecast when the loan agreements were drawn up, such deep cuts were not necessary to meet a target of keeping the country's budget deficit level at below 8.5 percent of gross domestic product next year.
"According to the calculations of Ministry of Finance, the package of budgetary measures we are proposing, amounting to 325 million lats, will ensure this budget deficit level," Prime Minister Valdis Dombrovskis told Reuters on the sidelines of an international summit on the Baltics.
He said that with huge budget cuts already made, further, unnecessary cuts would only slow the economic recovery.
"We risk to lock ourselves into this negative scenario," he said. "And it also increases the chances of social unrest considerably," he said.
LITTLE CHOICE
Dombrovskis, however, admitted that the country -- which has already slashed spending in areas like public services -- did not have much choice in the matter.
"This is quite a clear, that we need to continue with the international loan programme," he said.
"If the choice is between bad, counterproductive measures which ... will also cause social problems, and an even worse scenario -- the discontinuation of the programme -- then we choose the less bad scenario, of course," he said.
He said Latvia would be discussing the issue with international lenders in the coming weeks.
All is not doom and gloom, however.
Latvia's economy, which is expected to contract around 18 percent this year and 4 percent in 2010, bottomed out in the second and third quarters, Dombrovskis said.
"The fourth quarter, we know certainly already, is going to be better," Dombrovskis said.
Gross domestic product should move into positive territory in the fourth quarter of next year, he added.
With the stabilisation programme on track to keep the budget deficit below 10 percent of GDP this year and 8.5 percent of GDP in 2010, Latvia is also sticking to its target date of 2014 for euro entry.
"Currently, there is no reason to amend the euro entry date," Dombrovskis said.