As talks between Latvia and the IMF over the fund’s second instalment of aid to the country slog through to their second extended day, Danske Bank offers the following piece of advice to Latvian Economics Minister Artis Kampars who let loose on Latvian TV this week with the following outburst:
“Representatives sitting in Washington and educated at Yale do not fully understand what is going on in Latvia.”
To this Danske Bank says:
While Mr. Kampars might be right on his assessment of the IMF staff, it is certainly unhelpful for further negotiations (if there are to be any) to bad mouth the institution that is supposed to give Latvia a loan. In our view it increasingly looks like the IMF will not pay out the next instalment on Latvia’s loan. This not only has ramifications for Latvia, but should also be a reminder to investors that the IMF is not just a “money machine” that automatically bails out all countries with funding needs.
In any case, Latvia-IMF watch continues.
In the interim Edward Hugh over at A Fistful of Euros draws attention to the following — apparently hastily put-together — document issued by the European Commission on the subject of Latvia. You can view the full document here. As Hugh explains:
Reading the document, one thing seems certain: the upcoming tranche of 1.2 billion euros will not now be sufficient to cover the budget deficit for 2009, since the EC requires half of the money to be set aside for the financial sector – which prompts the question, is the nationalized Parex bank really as healthy as the government and the bank’s leadership have previously said it was?
Which makes those IMF funds slightly more imperative.
Related links:
EU-IMF breakdown over Latvia? – FT Alphaville
D-day in Latvia- FT Alphaville