The European Commission will pay out the second instalment of its 3.1-billion-euro (4.4-billion-dollar) emergency loan to Latvia "in the second half of July," dpa cited officials in Brussels as saying today. The instalment, which consists of 1.2 billion euros, is to be disbursed after the signature by the Latvian authorities and the commission Thursday of an additional Memorandum of Understanding, and once the EU executive has succeeded in raising the necessary amount on the financial markets, officials said. "Latvia is going through a very painful adjustment, but the EU is providing considerable support with a balance of payments loan that is the biggest part of the international financial assistance, and the second instalment of which will be disbursed in the coming weeks," said Economic and Monetary Affairs Commissioner Joaquin Almunia. The EU facility is part of a broader 7.5-billion-euro loan put together along with the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development, as well as Sweden, Denmark, Norway, Finland, Estonia, Poland and the Czech Republic. The Latvian parliament earlier this month approved a package that includes pay cuts of up to 20 per cent for civil servants and a 10- per-cent cut in pensions in order to avoid the risk of insolvency as a result of the global financial crisis. The commission Thursday set a 2012 deadline for Latvia to reduce its budget deficit, from the current 11 per cent of gross domestic product, to within the 3-per-cent limit set by EU rules. "The correction of the large budgetary and macro-economic imbalances will put the country on the road to the euro and to sustainable growth conducive to employment creation," Almunia said. Latvian Prime Minister Valdis Dombrovskis welcomed news that the money would soon be on its way. "The decision by the European Commission to grant the second part of the loan to Latvia affirms that the budgetary amendments ... as well as the structural reforms and economic stabilization plan undertaken by the government have been proper and well-needed measures," he said. However, he also noted that it would require further tough decisions to meet the tight 3-per-cent of GDP limit including a reduction of public administration by "at least 30 per cent."
