AFP - Latvia's constitutional court Monday struck down pension cuts that form a key plank of an austerity drive, casting doubt on a crucial IMF and EU-led bailout for the recession-hit Baltic state.

"The decision to cut pensions violated the individual's right to social security and the principle of the rule of law," the court said in its judgement, which cannot be appealed.

It said that while the government could tighten its belt at a time of crisis, agreements signed with international lenders "in and of themselves cannot serve as an argument about the limiting of basic rights" and that lawmakers who approved the rushed-through cuts had "not evaluated carefully the alternatives."

The court said the cuts -- in force since July, and clawing back between 10 and 70 percent of a pension depending on an individual's status -- were illegal and parliament must by March 2010 have measures in place to rescind them.

The cut money itself must be paid back no later than 2015, the court ruled in the case brought by 9,000 individual pensioners.

The government won a similar case in November over its decision to stop linking pensions to inflation.

Welfare Minister Uldis Augulis said Monday that the government would have to find almost 184 million lats (258 million euros, 370 million dollars) to refund unpaid pensions and resume full payments at pre-cuts levels.

It was not immediately clear how Latvia's embattled centre-right government would meet the challenge, nor what the impact would be on the international rescue package that has been helping keep the country afloat.

Finance Minister Einars Repse said the government may have to ask parliament to amend the budget. He said the government would have to find the money within spending limits agreed with lenders.

In Washington, the International Monetary Fund said it would "continue to work with the authorities and will discuss the details of the ruling with them once the effects on the budget have been fully examined."

Analysts said the decision could cause renewed political problems in Latvia.

"The constitutional court's decision is good news for pensioners," said Janis Hermanis, an economist at Hipoteku Banka in Riga.

"On the other hand, this will put forward a question of how to secure the budget consolidation promised to the international lenders. As long as there's no clarity on where the government will find additional financial resources, it will provide fertile ground for speculation, the worst of which would be a government collapse," he said.

Latvia's current government took office in March after a previous one fell apart amid the crisis.

Morten Hansen, a professor at the Stockholm School of Economics in Riga, said the ruling was "bad news."

Latvia is in the middle of one of the steepest recessions in the 27-nation European Union. Its economy is expected to shrink by up to 18 percent this year -- a far cry from the double-digit boom it enjoyed after joining the EU in 2004.

Its fractious coalition government has over the past year been raising taxes and paring public services to the bone as it tries to stick to the terms of a 7.5-billion-euro (10.7-billion-dollar) bailout agreed at the end of 2008 with lenders including the IMF and EU.

Under the deal, Latvia pledged to cut 500 million lats (702 million euros, 1.0 billion dollars) each year until 2012.

Latvia, a country of 2.2 million people, broke from the crumbling Soviet Union in 1991. Its overheated economy withered in 2008 as a credit bubble burst and the global crisis struck.