Brussels, 24/11/2008 (Agence Europe) - In a joint declaration made on Saturday 22 November, the French presidency of the Council of the EU and the European Commission explained the European Union's commitment to grant financial assistance to Latvia to calm tension that had recently appeared on the country's markets. The draft explained that, “We are in close consultations with the Latvian authorities and the International Monetary Fund to develop a joint response to the growing tensions in Latvia's financial markets”. Just as it had for Hungary (EUROPE 9772), the declaration outlined that the EU is prepared to contribute to a financial package coordinated with the IMF, “conditional upon a strong commitment by the Latvian authorities to implement a rigorous and credible adjustment programme in order to underpin balance of payment sustainability in Latvia”.
Activation of the Community financial support mechanism (governed by Regulation 332/2002) aims to improve the balance of payments situation in member states that do not belong to the Euro-zone. €6.5bn was allocated to Hungary (these funds will be borrowed on the markets) and the ceiling for this mechanism has been taken up to €25bn (instead of the previous €12bn). Intervention modalities to help Latvia still have to be finalised and the amount of assistance has not been unveiled. After three years of double figure growth (10.3% in 2007!), Latvia is expected to experience a fall in GDP of 0.8 in 2008 and 2.7% in 2009, according to the Commission's most recent statistics. (A.B./trans/rh)