Swedish Finance Minister Anders Borg

Swedish Finance Minister Anders Borg Friday urged Latvia to take steps to reduce its budget deficit and pledged continued support for the recession-hit Baltic nation when Sweden assumes the presidency of the European Union in July.

In a speech outlining Sweden’s plans for its six-month role as E.U. president, Borg said Sweden would work together with the E.U. and International Monetary Fund to alleviate the pressure on Latvia’s economy.

The Baltic nation is forecasting an 18% drop in gross domestic product this year, the sharpest fall in the E.U., and a budget deficit of 9.2% of GDP, almost double the level agreed with international lenders in December to secure a EUR7.5-billion rescue deal.

Latvia is waiting for the second tranche of the loan to be distributed, but the IMF is concerned the country is not doing enough to rein in overspending.