* Says 7.5 bln eur bailout programme should continue
* Sees little chance of renegotiating terms
* Cautiously optimistic can stay in power after Oct vote
By Aija Braslina
RIGA, Sep 22 (Reuters) - Latvia has little choice but to stick to the tough austerity programme that goes with its 7.5 billion euro IMF-led bailout, its prime minister said, rejecting opposition demands for talks with the Fund to re-negotiate terms.
Valdis Dombrovskis said he was cautiously optimistic about remaining in power after elections on October 2, though recent voter polls have been at best mixed for his coalition.
"The current work to implement the existing (International Monetary Fund) programme should be continued," Dombrovskis told Reuters in an interview late on Tuesday.
"I don't have big expectations that we could review the terms one more time now, especially as so many countries in the European Union are working on budget reduction."
Proposals to increase Latvia's budget deficit were not viable. "It would most likely not be possible to do that from the international bailout programme and markets will not finance that as it is not sustainable fiscal policy," he said.
Latvia's economy slumped 18 percent last year, the steepest fall in the European Union, and is expected to drop a further 2 percent this year.
Under the terms of the bailout it took at the end of 2008, the government was forced to push through harsh budget cuts including slashing public sector salaries. It aims to get its budget deficit down to 3 percent of gross domestic product by 2012 in order to adopt the euro in 2014.
ELECTION HOPES
Dombrovskis saw chances his coalition could remain in power. "According to... opinion polls the current government might receive a majority in the next parliament," he said.
Polls have consistently been led by a Russian-language opposition party, Harmony centre, with Dombrovskis's Unity bloc in second place.
Dombrovskis's current main coalition partner, the Union of Greens and Farmers, has been polling third place, and a survey this week from pollsters Latvijas Fakti showed the smallest party in the coalition below the barrier of 5 percent of votes needed for parliamentary representation.
Meanwhile a new party led by two well known businessmen-politicians, For a Good Latvia, is expected to enter parliament, further undermining the chances of the current government continuing.
Dombrovskis said any moves to end the bailout programme, from which around 5 billion euros has been disbursed, would rattle investors.
"The problem is that markets are calm (about Latvia) because we have this international bailout programme. If we did not have the ... deal there would be a good deal of nervousness, ... something similar to what we experienced in the middle of 2009," he said.
At that time the lat currency slumped and the central bank had to intervene heavily to protect it, while local interest rates soared. They have now eased sharply, with the twin overnight rates standing at multi-year lows of 0.20 and 0.67 percent.
Dombrovskis said he would continue to resist calls from home and abroad to devalue the lat.
"My position is to further implement the current plan, which does not anticipate a devaluation," he said.
(Editing by John Stonestreet)