Czech Republic balks at Latvian loan

RIGA - During a parliamentary debate concerning the Czech Republic’s loan commitment to Latvia, Czech Finance Minister Eduard Janota has expressed concerns as to whether the 200 million euros allocated to Latvia, as a loan, would ever be paid back, reports business daily Biznes&Baltija. The loan, which has a seven year term and a 4.814 percent interest rate, was to have arrived in Latvian state accounts in two 100 million euro installments last year and this year. However, although the money was already available in summer 2009, a credit agreement has still not been concluded. After a Feb. 4 debate in the Czech parliament, there are now doubts as to whether these funds will be given to Latvia at all. Janota expressed doubt that Latvia would be able to repay the loan; additionally, an agreement over the loan has yet to be signed. “Who wishes to be the first to lend money to Latvia and cry about it later?” said the influential Czech politician, adding that of the seven countries who promised money - Norway, Sweden, Denmark, Finland, the Czech Republic, Poland, and Estonia - none have yet transferred any funds to Riga.

The Czech finance minister also claimed that the credit would be used for state purposes and pensioners, rather than for important business projects as the Czechs had been hoping. Janota also said that he had discussed the situation with his Polish counterpart Jan Vincent-Rostowski, who had indicated that the possibility of including penalties in the agreement was being considered.

The Czech government could make their final decision in the next 14-20 days. Latvian Foreign Minister Maris Riekstins (People’s Party) told journalists today that “the opinion of one Czech parliamentarian hardly reflects Latvia’s ability to pay back the money it has borrowed.” In the minister’s view, the international community, including the lenders, evaluates Latvia’s achievements positively in consolidating the state budget. “We have to be a little more modest and understand that Latvia is not the only country in the world which is not experiencing good times in its economic development,” said Riekstins, stressing that Latvia’s image had not been fundamentally damaged as a result of the economic crisis.