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Financial assistance to Latvia

SUMMARY OF:

WHAT IS THE AIM OF THESE DECISIONS?

The European Union (EU) and various international organisations provided financial assistance to Latvia between December 2008 and the end of 2011.
The basis for this is Regulation (EC) No 332/2002 which allows the EU to provide medium-term financial assistance to EU countries not in the euro area that have difficulties in their balance of payments.

KEY POINTS

In January 2009, multilateral financial assistance for Latvia of €7.5 billion was agreed for the period 2009-2011. The funding comprised:
- EU: €3.1 billion under its balance of payments assistance programme;
- International Monetary Fund (IMF) : around €1.7 billion;
- Nordic countries (Sweden, Denmark, Finland, Norway) and Estonia: €1.9 billion;
- World Bank : €0.4 billion;
- European Bank for Reconstruction and Development , the Czech Republic and Poland: €0.4 billion.
In exchange for the loans, Latvia agreed to:
- restore financial stability by strengthening the banking sector;
- correct fiscal imbalances (i.e. in public finances);
- adopt domestic policies to improve competitiveness;
- improve the crisis management capacity of regulatory authorities;
- implement comprehensive structural reforms.
€4.5 billion were eventually paid out by the time the assistance programme ended on 19 January 2012.
From 20 January 2012, the European Commission began its post-programme surveillance, organising six review missions to the country.
The surveillance ended in January 2015 after Latvia had repaid 75% of the EU loan.

FROM WHEN DO THE DECISIONS APPLY?

Decisions 2009/289/EC and 2009/290/EC took effect on 23 January 2009.

BACKGROUND

In February 2002, the Council of the European Union gave the EU the power to grant loans to EU countries experiencing, or threatened with, difficulties in their balance of payments or capital movements.
This financial assistance is only available to countries which do not use the euro.
Latvia first applied for the assistance in late 2008 after its capital and financial markets came under heavy pressure and the banking sector suffered serious problems of liquidity and confidence.
On 1 January 2014, Latvia joined the euro area.
For more information, see:
- ‘EU balance-of-payments assistance for Latvia: foundations of success’ on the European Commission's website
- ‘ Post-programme surveillance for Latvia ’ on the European Commission's website.

MAIN DOCUMENTS

Council Decision 2009/289/EC of 20 January 2009 granting mutual assistance for Latvia (OJ L 79, 25.3.2009, pp. 37–38)

Council Decision 2009/290/EC of 20 January 2009 providing Community medium-term financial assistance for Latvia (OJ L 79, 25.3.2009, pp. 39–41)

Successive amendments to Decision 2009/290/EC have been incorporated in the original text. This consolidated version is of documentary value only.