Latvia signs 1.9-billion-euro loan deal with Nordics

Sep 21, 2010, 11:34 GMT

Riga - The Baltic state of Latvia signed agreements Tuesday with neighbouring countries, making 1.9 billion euros available to it as part of a total 7.5-billion-euro (10-billion-dollar) loan package brokered by the European Union and International Monetary Fund (IMF).

Latvian Finance Minister Einars Repse signed the deal with the Nordic states of Denmark, Estonia, Finland, Norway and Sweden in Riga.

'Loan agreements with the Nordic countries will provide us not only with an opportunity to borrow financial resources, but also will contribute to the stability of the whole region,' Repse said.

Latvia will not necessarily use the Nordic money if the country's current economic revival continues, Repse said.

The future of Latvia's loan from international lenders has become a hot topic in debates ahead of a general election on October 2.

The government of incumbent Prime Minister Valdis Dombrovskis says that continuity in relations with lenders is paramount for an 'exit strategy' of euro adoption in 2014.

Opposition parties prefer to paint the lenders as staging an 'economic occupation' of the country, as meeting the conditions of the loan has entailed widespread cuts to public services including health and education, reduced social security payments and large- scale job losses.

The Latvian economy contracted by 18 per cent in 2009 when a credit and property bubble burst in spectacular fashion after a decade-long boom.