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On Wednesday, 15 July, members of the European Affairs Committee were updated on the latest developments in Greece and the euro area. Members of the Committee learned that even if today the Hellenic parliament approves the reform agreement adopted by the extraordinary Euro Summit meeting on 12 July, and the countries of the euro area decide to give a new loan to Greece, the assistance will not be covered from national budgets of Latvia or any other country. 

According to the representative of the Ministry of Finance, Latvian tax payers will not be affected by Greece’s bailout deal because the aid will not come from the European Stability Mechanism (ESM); Latvia’s contributions to the ESM are not expected to increase, nor is its external debt. The ESM will obtain the funds needed by Greece in the form of a loan from international financial markets, explained Lolita Čigāne, Chairperson of the European Affairs Committee.

The Ministry of Finance claims that regardless of whether the ESM funds are used or not, in the next five years Latvia will have to make annual contributions to the ESM in the amount of EUR 44 million per year.

Nils Sakss, Director of the Fiscal Policy Department of the Ministry of Finance, explained to the Committee members that members of the ESM would have to cover the financial liability only if Greece does not repay the loan and the debt is written off; however, the Euro Summit statement excludes such an option.

“Low trust of the European leaders towards the Greek government and its promises are the key factors here. Therefore, when the assistance programme is rolled out, Greece will receive the funding in small instalments and only upon implementation of specific reforms. This will ensure that the money is not spent in vain and will help the state to implement hard and much-needed reforms that will put the country back on the path of growth and rebuild the trust of financial markets as Latvia did not so long ago,” said Chairperson Čigāne.

According to the Chairperson, the loan agreement still has to be approved at the European Council by the heads of state and government of the EU member states. The procedure requires the European Affairs Committee to approve the position drafted by the Latvian government on this matter.

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Saeima Press Service