EU set to unblock bailout cash for Latvia

(BRUSSELS) - The EU Commission will hand cash-strapped Latvia the second instalment of a stalled bailout package in the coming weeks, after approval by member states' experts, a spokesperson said Friday.

"The Commission has consulted the Economic and Financial Committee," which brings together experts from European treasuries and central banks, and will now prepare for the second loan instalment "which will be disbursed in the next weeks," said Amelia Torres, the commission spokeswoman on economic affairs.

The move comes after Latvia introduced painful austerity measures which led to the health minister's resignation.

In December, Latvia won a 7.5-billion-euro (10.1-billion-dollar) bailout from the IMF, European Union and other lenders.

Of that total the EU will provide up to 3.1 billion euros and has already handed out the first billion.

However the 1.2 billion euros second instalment had been suspended pending further deficit cut moves.

The government in Riga has made repeated, massive budget cuts as it scrambles to meet the terms of the rescue package and receive the tranches it needs to ward off bankruptcy.

It has been forced to cut most public sector salaries by 20 percent and pensions by 10 percent along with a raft of other cuts in order to meet the terms of the international bailout.

The European Commission and the Czech EU presidency have welcomed the latest austerity measures, ten days ago promising a decision on the second tranche of loans to the small Baltic nation.

The Latvian economy is expected to contract by 18 percent this year, the worst decline in the 27 member European Union.