Latvia joins queue for IMF, EU financial help

14:30, 20 November 2008
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Latvia has gone into recession

Latvia, which has gone into recession and had to take over its second-largest bank, became the latest country on Thursday to decide to seek financial help from the International Monetary Fund and European Commission, Reuters reported.

Latvia has gone from having Europe`s fastest-growing economy to a slide in the economy of 4 percent in the third quarter and state finances have worsened due to tumbling revenues.

Its decision to approach the IMF meant it joined Hungary, Ukraine and Serbia in approaching the Fund for help.

"We have decided to start official talks with the European Commission and the IMF about funding to stabilise the economy," Prime Minister Ivars Godmanis told reporters.

Finance Minister Atis Slakteris, who said last week an initial approach had been made to Commission and that IMF aid was not excluded, said in a statement that the sums needed would become clear during the course of talks.

He said the money was needed to reduce the impact of the global financial crisis on Latvia, to boost the economy and to ensure the stability of the financial system.

"It is planned that the first results of the talks could be known in the next week," Slakteris said.

The talks with the IMF would be held by the Finance Ministry and central bank, he said.

As well as facing a rising budget deficit, which the central bank said could hit 4 percent of gross domestic product (GDP) next year, Latvia has also had to take over its second-largest bank, Parex Bank, after a run on deposits.

Latvia has already injected 200 million lats ($353.2 million) into Parex and is standing guarantor for more than 700 million euros of syndicated credits due next year. If these credits canot be refinanced, the state will have to repay them.

If successful in its talks, Latvia would be the second EU country to get outside help after Hungary`s $25.1 billion IMF and EU rescue.


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