Austerity measures imposed on Latvia in return for emergency loans
Just a foretaste of what will be imposed upon Gordon Brown and us when
he goes cap in hand to the IMF, always assuming they then have any
money left to bail Brown out! B&A
http://euobserver.com/9/27329?print=1
Austerity measures imposed on Latvia in return for emergency loans
LEIGH PHILLIPS 22.12.2008
EUOBSERVER / BRUSSELS - Latvia is to receive €7.5 billion in loans from
the European Union and the International Monetary Fund to bolster its
battered economy, hit hard by the ongoing global financial crisis.
The EU will stump up €3.1 billion of the package to the country, the
latest European country and second EU member state to be forced to go
cap in hand to Brussels and international financial institutions in the
wake of the crash.
The Latvian parliament: Dark days for the country's economy
The IMF meanwhile will deliver €1.7 billion, with another €1.8 billion
coming from Nordic countries Denmark, Finland, Sweden and non-EU nation
Norway.
The European Bank of Reconstruction and Development together with the
Czech Republic, Estonia, and Poland will also provide a total of €500
million.
The monies, announced on Friday (19 December) which will buttress the
Latvian economy up to the first quarter of 2011, come in return for an
agreed package of swingeing austerity measures, which the European
Commission and the presidency of the council of economic and finance
ministers described in a statement as "the Latvian authorities' firm
commitment to implement a major programme of economic adjustment."
Wide-ranging structural reforms and wage reductions, particularly in
the public sector have been approved by the country's parliament.
As part of the loan agreement, public sector wages are to be slashed by
15 percent in 2009 alongside deep cuts to government expenditures of 1
billion Latvian lats (€1.41 billion) alongside cuts to income tax and
increases in VAT
rates. The country aims to limit its budget deficit to five percent of
GDP in 2009, falling still further to three percent in 2011.
In total, the package of austerity measures equal seven percent of GDP,
while the loan amounts are equivalent to around a third of GDP.
"The financial assistance and the policy programme are designed to
enable the economy to withstand short-term liquidity pressures while
improving competitiveness and supporting an orderly correction of
imbalances in the medium term," the commission and the ecofin council
said.
Latvia has opted for the cuts and a maintenance of its existing
exchange rate peg, rather than let the lat slide in order to stay on
track for eventual euro adoption.
"This will also help meet the conditions for the adoption of the euro,"
the EU statement continued.
The specific conditions of the loans will be set in an upcoming Council
decision and further spelled out in a memorandum of understanding to be
concluded shortly with the Latvian authorities.
Superintendents
In effect, the commission and the ecofin council will become the
superintendents of the Latvian economy, overseeing the implementation
of the austerity package and ready to demand further cuts if necessary.
"The commission in collaboration with the economic and financial
committee will monitor regularly and closely that the economic policy
conditions attached to the financial assistance are fully implemented
and may request additional
measures when and if circumstances so require," the statement read.
The proposed medium-term financial assistance to Latvia from the EU
will consist of a European Community loan, which has yet to be approved
by the commission. This is expected to happen early in January. The
loan will then require approval by the EU finance ministers.
The Nordic countries have participated in the scheme as a result of
their heavy investment in the Balkans.
The EU in November also agreed to similar loans to Hungary worth some
€6.5 billion. Beyond the EU, Belarus, Iceland and Serbia have also
applied to the IMF for financial assistance to deal with the crisis.
The IMF board will meet before the end of the year to deliver its final
approval to the deal.
© 2008 EUobserver.com. All rights reserved. Printed on 23.12.2008.
Just a foretaste of what will be imposed upon Gordon Brown and us when
he goes cap in hand to the IMF, always assuming they then have any
money left to bail Brown out! B&A
http://euobserver.com/9/27329?print=1
Austerity measures imposed on Latvia in return for emergency loans
LEIGH PHILLIPS 22.12.2008
EUOBSERVER / BRUSSELS - Latvia is to receive €7.5 billion in loans from
the European Union and the International Monetary Fund to bolster its
battered economy, hit hard by the ongoing global financial crisis.
The EU will stump up €3.1 billion of the package to the country, the
latest European country and second EU member state to be forced to go
cap in hand to Brussels and international financial institutions in the
wake of the crash.
The Latvian parliament: Dark days for the country's economy
The IMF meanwhile will deliver €1.7 billion, with another €1.8 billion
coming from Nordic countries Denmark, Finland, Sweden and non-EU nation
Norway.
The European Bank of Reconstruction and Development together with the
Czech Republic, Estonia, and Poland will also provide a total of €500
million.
The monies, announced on Friday (19 December) which will buttress the
Latvian economy up to the first quarter of 2011, come in return for an
agreed package of swingeing austerity measures, which the European
Commission and the presidency of the council of economic and finance
ministers described in a statement as "the Latvian authorities' firm
commitment to implement a major programme of economic adjustment."
Wide-ranging structural reforms and wage reductions, particularly in
the public sector have been approved by the country's parliament.
As part of the loan agreement, public sector wages are to be slashed by
15 percent in 2009 alongside deep cuts to government expenditures of 1
billion Latvian lats (€1.41 billion) alongside cuts to income tax and
increases in VAT
rates. The country aims to limit its budget deficit to five percent of
GDP in 2009, falling still further to three percent in 2011.
In total, the package of austerity measures equal seven percent of GDP,
while the loan amounts are equivalent to around a third of GDP.
"The financial assistance and the policy programme are designed to
enable the economy to withstand short-term liquidity pressures while
improving competitiveness and supporting an orderly correction of
imbalances in the medium term," the commission and the ecofin council
said.
Latvia has opted for the cuts and a maintenance of its existing
exchange rate peg, rather than let the lat slide in order to stay on
track for eventual euro adoption.
"This will also help meet the conditions for the adoption of the euro,"
the EU statement continued.
The specific conditions of the loans will be set in an upcoming Council
decision and further spelled out in a memorandum of understanding to be
concluded shortly with the Latvian authorities.
Superintendents
In effect, the commission and the ecofin council will become the
superintendents of the Latvian economy, overseeing the implementation
of the austerity package and ready to demand further cuts if necessary.
"The commission in collaboration with the economic and financial
committee will monitor regularly and closely that the economic policy
conditions attached to the financial assistance are fully implemented
and may request additional
measures when and if circumstances so require," the statement read.
The proposed medium-term financial assistance to Latvia from the EU
will consist of a European Community loan, which has yet to be approved
by the commission. This is expected to happen early in January. The
loan will then require approval by the EU finance ministers.
The Nordic countries have participated in the scheme as a result of
their heavy investment in the Balkans.
The EU in November also agreed to similar loans to Hungary worth some
€6.5 billion. Beyond the EU, Belarus, Iceland and Serbia have also
applied to the IMF for financial assistance to deal with the crisis.
The IMF board will meet before the end of the year to deliver its final
approval to the deal.
© 2008 EUobserver.com. All rights reserved. Printed on 23.12.2008.
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