On Tuesday, 18 August, Latvian Cabinet of Ministers voiced the final approval of the country’s national position on measures necessary for Greece to carry out in order to stabilize its economic situation and decisions the Greek government has to make in order to conclude its macroeconomic correction plan.
The government-approved position also includes amendments proposed by members of the Saeima European Affairs Committee.
«Latvia’s position on this matter is strict. Greece will not be provided any money if the country fails to realize actual reforms to stabilize its economic situation and ensure economic growth. If actual work is carried out, money will be provided! Over the course of this month we have carried out careful talks and have made well-weighted decisions. All of Europe and Greece understand their responsibility in offering help and fulfilling their duty,» – notes Finance Minister Janis Reirs.
In order to completely exclude the possibility of any kind of loss for Latvia’s budget, the national position also emphasizes strict opposition of solutions that could potentially require a payment of new reserves from Latvia’s budget to the European Stability Mechanism. This option is only considered possible if the country’s budget is later provided a full compensation. Latvia’s representative in ESM will have a duty to use his right to veto any initiatives that do not include state budget compensation, Finance Ministry reports.
It is important to mention that the new bailout plan will neither affect the deficit of Eurozone member states nor state debts. It will not create the necessity to carry out additional payments to ESM. In order to afford a new bailout plan, ESM will borrow resources on international financial markets. Considering ESM’s high credit rating, it will be provided with very beneficial conditions. Money paid by ESM member states is invested and used to procure valuable securities on financial markets. This funding is not paid for state financial assistance programmes. This is why there is no risk involved for member states and their money.
Unchecked insolvency of a single Eurozone member state presents a big risk for stability of the entire monetary union. Consequences for such a scenario are impossible to predict. This is why it is important for all member states, including Latvia, to ensure Greece strengthens its economy, security and welfare, notes the ministry.
The approved position authorizes Finance Minister Janis Reirs to participate in EU Council’s initiated written procedure and ESM vote on the new bailout plan for Greece on Wednesday, 19 August.
The total size of financial assistance to Greece will be EUR 86 billion. Its average loan period will be 32.5 years. This money will be paid in multiple instalments. Greece also has to sign an agreement in regard to the third bailout plan before 20 August, when the country is expected to pay back EUR 3.4 billion to the European Central Bank.