Latvia to get 7.5 bn euro loan package: EU

BRUSSELS: International donors have agreed to provide Latvia with a 7.5-billion-euro loan package to help the embattled Baltic country cope with a severe economic downturn, the European Commission said on Friday.

The European Union is to provide the biggest share of the package, offering up to 3.1 billion euros (4.3 billion dollars) in medium-term assistance, the bloc's executive arm said in a statement.

The Nordic countries, Sweden, Denmark, Finland and Norway, will provide a combined 1.8 billion euros and the International Monetary Fund will offer 1.7 billion euros.

The European Bank for Reconstruction and Development along with Czech Republic, Poland and Estonia will provide 500 billion euros while the World Bank will provide a further 400 million euros.

"The financial assistance will be conditional on the implementation of a comprehensive economic policy programme," the commission said in a joint statement with EU finance ministers. "The financial assistance and the policy programme are designed to enable the economy to withstand short-term liquidity pressures," it added.

The Latvian government has been negotiating for weeks with the IMF, the European Union and Sweden, a major investor, on loans to save its ailing economy. Last week Latvian lawmakers approved belt-tightening measures, including huge budget cuts, to cushion the Baltic state from its deepening economic crisis and a looming deficit that represents seven percent of gross domestic product.

Latvia slid into recession this year, jettisoning its reputation as an economic "tiger" in the EU, which it joined in 2004. The EU statement said that the package would allow Latvia to keep its exchange rate peg to the euro, which is necessary to keep alive the Baltic country's hopes of adopting the shared European currency one day.

The IMF, the World Bank and the European Union extended a 20-billion-euro credit line to Hungary at the end of October to help it cope with a severe balance of payments crisis as the global credit crunch sapped investor confidence.