The Latvian government at an extraordinary meeting on Monday approved Latvia's national position regarding the 86-billion-euro (95 billion U.S. dollar) bailout program for Greece, the third international assistance program for the cash-strapped country since 2010, Baltic News Service reported.
Latvian Prime Minister Laimdota Straujuma told the press after the meeting that Latvia's position included a reservation in case any discussion were to begin about a possible write-off of Greek debts. Should this happen, Latvia would agree to any write-offs only on condition that there be no loss to its own national budget.
Latvian Finance Minister Janis Reirs, speaking to journalists, explained the Eurogroup's decisions on the Greek bailout deal made on Aug. 14.
Speaking about the possible debt write-off, Reirs said Latvia was prepared to contribute to the bailout program, but it would be contradictory to the solidarity principle to have countries with smaller GDP than Greece's to simply give away their money to Greece.
"There should be a guarantee mechanism to protect budgets of those countries. One mechanism is the 50-billion-euro privatization fund," the Latvian finance minister said, adding that reducing contributions to the European Stability Mechanism (ESM) could be another mechanism. Moreover, 350 billion euros from the EU Cohesion Fund earmarked for Greece in the current planning period could also serve as a guarantee, he said.
Nevertheless, Latvia is still categorically against any write-off of Greek debts and will make its position known only if some other country proposed write-offs, Reirs said.
Latvia's position includes two conditions on which it would be ready to approve the bailout deal for Greece. The first condition is that the Greek parliament has to approve the bailout deal on conditions outlined in a memorandum of understanding with the European Commission, International Monetary Fund (IMF), and the European Central Bank (ECB). Latvia's position also includes the so-called red line regarding any initiatives under which Greece's debts could be written off.
The extraordinary cabinet meeting was called to mandate a Latvian representative to participate on Aug. 17 in a written procedure initiated by the Council of the EU. The representative will also vote at a meeting on Aug. 19 of the ESM board and directors on decisions that are necessary to authorize the European Commission to sign a memorandum of understanding with Greece and release the first installment of the loan.
The final agreement between Greece and its creditors has to be reached by Aug. 20 when Greece is due to repay 3.4 billion euros to the ECB.