Riga - Latvia moved closer to getting a new government Wednesday when prime minister-designate Valdis Dombrovskis announced that his centre-right coalition had agreed on its legislative programme.

Priorities will include the promotion of entrepreneurship, a reduction in bureaucracy and the efficient use of EU funds, Dombrovskis said, ahead of the release of the full text of his government declaration.

"This is the solution we have reached," said Dombrovskis, who last month was called back to Latvia from his work as a member of the European Parliament in order to head a new government.

Following a series of meetings, he told reporters his administration would have to implement even tougher spending cuts than those planned by his predecessor, Ivars Godmanis, who resigned on February 20.

The five-party coalition proposed by Dombrovskis includes three of the four parties that formed the Godmanis government.

Among the most controversial plans agreed to by the prime minister-designate was a 20-per-cent cut in teachers' wages. Previously, teachers had been spared the swingeing cuts applied across the rest of the public sector.

The Baltic state faces a financial crisis and has previously been described by Dombrovskis as being on the verge of bankruptcy. National GDP is predicted to fall by 12 per cent during 2009, according to official estimates.

In December 2008, the Godmanis government secured a 7.5-billion- euro (9.5-billion-dollar) economic bailout package from the International Monetary Fund, World Bank, European Union and other international bodies.

But the economic situation in Latvia has deteriorated so quickly since then that Dombrovskis raised the possibility that new terms for the loan may need to be negotiated.

Outgoing finance minister Atis Slakteris broached the idea of a revised deal with representatives of the IMF, European Monetary and Economics Affairs Commissioner Joaquin Almunia and Nordic finance ministers on March 10.

"Further negotiations will be complex, and negotiators will need to have in-depth facts and figures available to demonstrate what is the right course for Latvia," Slakteris warned after the meeting.

Slakteris is due be replaced by former prime minister and central bank governor Einars Repse if the Latvian parliament approves Dombrovskis' plans in a vote that could be held as soon as Thursday. (dpa)