decline of economic activity in the European Union. So, for instance, the revenues of the State consolidated budget during the first six months of 2009 were for 15 % lower than those of the corresponding time period in 2008. At the same time, the expenditures of the State consolidated budget during the first six months of 2009 were for 7.2 % higher than those of the corresponding time period in 2008. The Gross Domestic Product drop in comparison to the first six months of 2008 was 18.7 %. The drop persisted also in the third quarter of 2009, reaching 18.4 % (see http://www.csb.gov.lv/csp/content/?cat=244, accessed on 1 December 2009). The prognosticated amount of the government’s external debt for the second half of 2009 was approximately 33.2 % from the Gross Domestic Product, and it has increased for approximately 70 % since 2008 (see http://ec.europa.eu/economy_finance/pdf/2009/autumnforecasts/lv_en.pdf, accessed on 1 December 2009). During this time, the financial deficit of the State consolidated budget reached 449.9 million lats or approximately 3.5 % from the Gross Domestic Product, and the prognosis was that the deficit may reach 1.3 milliard lats or approximately 9.5 % from the Gross Domestic Product by the end of 2009. As a consequence, both the performance of the functions of the State and the possibility of the economic activity renewal in the foreseeable future would be put in danger (see the opinion of the Bank of Latvia, Case materials, vol. 9, p. 118). Concerning the need to balance the revenues and expenditures of the social security system, the Saeima indicated that, as a result of the economic crisis, wages had decreased and unemployment – increased. Consequently, the social insurance special budget revenues dropped. The number of socially insured persons has also decreased for 12.3 %. It is also evident from the information furnished by the Ministry of Welfare that the actual expenditures of the social insurance special budget were for approximately 86 million lats higher than revenues during the first six months of 2009 (see Case materials, vol. 9, p. 113). At the same time, the rapid increase of wages during the preceding years has brought about the increase of the expenditures of the social insurance special budget. The budget in question is a constituent part of the State budget. It is prognosticated that its expenditures will exceed the revenues in the years 2009 and 2010, thus creating the 40