Latvia renegotiates loan terms

Jan 06, 2010
Oskars Magone

The Prime Minister and President announced that an agreement had been reached on altering the terms of the loan (photo: president.lv)

RIGA - The Latvian government has successfully come to an agreement with a team of international lenders over the terms of a bailout loan that the country has received.

The terms of the loan were thrown into jeopardy at the end of 2009 when the Constitutional Court ruled that the government's pension cuts -- which amounted to 10 percent for non-working pensioners and70 percent for working ones -- were unconstitutional.

The ruling meant that the government would have to pay back some 110 million lats in back pensions in addition to the increased payouts throughout this year.

That would have meant the country could no longer meet the budget deficit stipulations outlined in the loan agreement.

Prime Minister Valdis Dombrovskis previously said that the country would "just go bankrupt" if the government were forced to follow through with all of the restrictions it was facing.

In a joint press conference with President Valdis Zatlers, the head of government said that a preliminary agreement with international lenders would allow the country to have a higher budget deficit -- up to 8.5 percent of GDP -- and thus be able to make the pension payouts by February.

It is now up to the Justice Ministry to determine whether the altered agreement will require ratification by the country's parliament.

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