Even though the decision about Latvia’s position in terms of the new bailout plan for Greece can be made by the government, it should be approved by the Saeima as well, noted Prime Minister Laimdota Straujuma.
The Prime Minister said trust is the most important faction in this matter. Trust in Greece’s ability and willingness to pay back the loan and carry out reforms. The first test of this trust will be the vote of the Greek parliament on Wednesday.
Straujuma explains that, in accordance with regulations, «the launch of the negotiation process and permission to provide a loan is a decision for the government». Nevertheless, this decision should also be approved by the Saeima European Affairs Committee and Budget Committee. The two committees could make their decisions on this matter at the end of August.
After the government meeting, Straujuma said Latvia will follow whether or not the Greek government decides to approve the planned reforms. An extraordinary meeting will be called on Friday, 17 July. During this meeting, the Latvian government will provide Finance Minister Janis Reirs a mandate to participate in the decision making process of Eurozone finance ministers in regard to Greece’s new bailout plan.
Head of Saeima’s Legal Affairs Office Dina Meistere notes that this matter is in the government’s competence. Nevertheless, nothing prohibits the government from turning to the parliament and asking for approval.
Straujuma had previously said that the Greek government has to demonstrate that reforms are truly being implemented. «We appreciate Greece’s provided proposals, but promises are not enough. We need to see actual work and we want to see it right now,» – said Straujuma.
The decision in regard to the third bailout plan for Greece and the size of help could be made in August. But it is only as long as Greece does not come across any major problems in the field of reforms, said Finance Minister Janis Reirs.
Reforms alone are not enough to guarantee a loan. If Greece manages to adopt necessary amendments to its laws, institutions – International Monetary Fund, European Central Bank and the European Commission – will study Greece’s request for assistance within four to six days. Only then will they start developing the bailout plan.
With that, Eurozone member states will make the decision regarding the opening of the bailout plan no sooner than August, explained Latvia’s Finance Minister.
Eurozone leaders have reached an agreement in regard to the new bailout plan for Greece. This plan would be realized using European Stability Mechanism. Greece has been given an ultimatum for the realization of economic reforms. Some of those reforms are to be realized by Wednesday.
Latvian Finance Ministry reports – if the third bailout plan is launched, ESM will borrow funds on international financial markets. It will not use the money paid by ESM member states. Payments provided to ESM by member states will not be used for Greece’s bailout.
Since Latvia’s membership in Eurozone and ESM, the country pays around 44 million to ESM annually. By performing payments to ESM, Latvia becomes a co-owner of ESM; the country procures capital shares in ESM. The board of ESM consists of Eurozone Finance Ministers. Membership provides member states voting rights. Each minister has one vote.
The money Latvia pays to ESM will not be used for Greece’s loan. ESM uses the money paid by member states to procure securities. Funds paid by member states form EUR 70 billion, which will serve as a buffer. This money allows ESM to receive the highest rating on financial markets, explains the ministry.
The topic of writing off Greece’s debts is not discussed on any level. IMF considered the possibility of extending the payback term. If this happens with ESM’s possible loan to Greece, ESM will borrow and re-finance the debt. No losses would appear for member states in this scenario as well. The possibility of using Latvian budget funds for Greece’s debt is only possible in the most dramatic situation – if Greece does not pay back its debt and payback term is not extended, notes the ministry.