"Certainly it makes things worse for an economy if you go into huge budget cuts during a recession," Dombrovskis said.
"It was really very painful measures we had to do in order to get the budget deficit under control… those kinds of measures, tax rises and expenditure cuts, are never popular," he said.
- Watch the video above for the full interview with Valdis Dombrovskis.
The Latvian economy contracted 6 percent in the first quarter of this year, which is a significant improvement from the near 17 percent contraction in the fourth quarter of 2009.
Roger Nightingale, strategist at Pointon York, agreed with Dombrovskis' claim that cutting the deficit comes at the cost of growth.
"The therapy that these organizations propose for an economy usually make things worse. They take a sick guy and they make him sicker," Nightingale said.
"The thing you want to do is have a good, efficient, competitive economy because if you get that, all other problems go away," he said.
"The fiscal deficit is pretty unimportant, what is important is the country's capacity to grow," he added.
Nightingale thinks the growth prospects for Europe as a whole are limited because the region is inefficient and uncompetitive.