Today, the European Commission (EC) formally requested that the Ecofin Council provide up to €3.1 billion in the form of a European Community Loan to Latvia. Last month, the Commission and the Presidency of the Ecofin Council issued a joint statement announcing its “intention to participate in the coordinated multilateral assistance to Latvia.”

The IMF has also committed to loan Latvia €1.68 billion in aid, however, the loan still remains subject to approval from the IMF’s Executive Board. Latvia will also receive financial assistance from the Nordic countries, the World Bank, the European Bank for Reconstruction and Development, the Czech Republic, Poland and Estonia which will amount to €7.5 billion (including the EU’s proposed €3.1 billion financing package). Mr. Joaquin Almunia, Commissioner for Economic and Financial Affairs stated that, “[t]his support demonstrates Community solidarity with a Member State that, in return, has committed itself to undertake courageous but necessary adjustment measures at a time of great international economic and financial uncertainty.”

The loan proposal is expected to be addressed at the upcoming meeting of the EU finance ministers, on January 20th. The EU’s “financial assistance will be disbursed in six installments during the coming two years, the release of which will be conditional on the implementation of a comprehensive economic policy programme adopted by the Latvian authorities last month.” The conditions of the loan will be outlined in a Memorandum of Understanding entered into with the Latvian government.

Last month, the EC approved Latvia’s support scheme for banks which is designed “to stabilize financial markets by providing guarantees to eligible banks to ensure their access to financing.”