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Saturday 22.10.2016 | Name days: Irīda, Īrisa

Economic Diary of Latvia. Money in exchange for actual work

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThis week decided the fate of the Greece’s bailout plan. Latvia participated in talks about the bailout plan. The country managed to show its character here and there.

On Tuesday, 17 August, Latvian government held a meeting behind closed doors. Under conditions of utmost secrecy ministers developed Latvia’s national position in regard to the allocation of money for Greece’s international loan. This national position contains two strict conditions.

First – the Greek parliament must approve the bailout plan along with the memorandum previously coordinated by European Commission, IMF and European Central Bank. The memorandum includes conditions like restoration of fiscal stability, provision of financial stability, contribution to growth, competitiveness and attraction of investments. The memorandum specifically states Greece will only receive the money if it successfully carried out established goals.

Second – if there is the slightest mentioning of writing off Greece’s debt, Latvia will only agree to it under the condition that all costs of this decision are compensated back to the country 100% and that Latvia’s state budget does not suffer losses as a result. As previously stated by Latvian Finance Minister Janis Reirs, Latvia’s position is clear: no payments will be provided to Greece if the country does not complete reforms to stabilize its situation and develop national economy.

Latvia’s position was similar to that of Germany, Austria, Holland, Finland, Estonia and Lithuania.

In the end all Eurozone member states agreed to support the new bailout plan for Greece. As confirmed by European Commission Vice-President for the Euro and Social Dialogue Valdis Dombrovskis, the first payment to Greece will be EUR 26 billion. EUR 16 billion of this amount will be provided to the government of Greece. Another EUR 10 billion will be reserved on a separate account for Greece’s banking sector. The decision on the use of this money will be made only after a full assessment of bank assets.

The new bailout plan provides for allocating a total of EUR 86 billion to Greece.

Translation difficulties

It is entirely possible that exceptional business of Latvian ministers in saving Greece was the reason why Latvian Agriculture Ministry failed to complete a full translation of the report on exports of fish products from Latvia, which would have allowed the Russian Agriculture Ministry to make its decision on lifting the ban on imports of Latvian fish products. In any case, the institution’s press-service has announced that no translation has been received as of yet.

Latvian Agriculture Ministry’s slowness seems rather odd, considering the Russian ban on imports of Latvian fish products has had a major impact on Latvian fish producers. Currently estimated losses from this new embargo are at EUR 100 – 200 million. Things are so bad, in fact, that the Latvian government has even approved a new set of rules of the Cabinet of Ministers to try and assist local fish producers. According to this document, Agriculture Ministry will allocate EUR 44.6 million for the development of industry companies by 2023. This money will be used to build new production lines and acquire basic means of production.

From the perspective of economics, the ministry’s actions are illogical: it would be better to pay for a speedy translation of necessary documents to make sure Latvian companies are once again capable of making money rather than support their economic activities artificially.

Unhappy dairy farmer

Even though Agriculture Ministry seems to have its hands full, there are more holes to fill. For example, on 24 August, Janis Duklavs will depart to Brussels for a meeting with EU Commissioner for Agriculture and Rural Development Phil Hogan in order to discuss Latvia’s request to provide dairy farmers financial assistance from the EU budget.

«Latvian and Baltic farmers in general are the ones to have lost the most from EU sanctions. Assistance to Baltic farmers, especially Latvian farmers, should be more significant and solidary,» – said Duklavs before his departure.

The minister plans to tell the commissioner about how Russia was Latvia’s main trade partner in terms of food and agricultural products before the adoption of sanctions. Dairy products make up 40% of the total value of products affected by the embargo. As a result of sanctions, Latvia not only lost the Russian market, but is now also forced to reduce exports to other countries, including Lithuania, Estonia, Germany and Denmark.

The minister also reminded that Latvian farmers continue to receive the smallest payments from the EU, which limits their competitiveness.

Duklavs had previously turned to Hogan earlier this year. The response he received was that no additional help is planned. As a result, Latvian Agriculture Ministry prepared a project that was approved by the government this week. This document provides for the supply of EUR 7.6 million to Latvian dairy farms in order to compensate losses caused by Russia’s embargo. As mentioned in the ministry’s explanation, dairy farms have already suffered losses worth EUR 50 million because of the embargo. Losses from exports of agricultural products are estimated at EUR 140 million. Because Russian sanctions are expected to remain in force until 5 August 2016, it is expected that these losses will only grow.


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