Latvia bailout example for Europe: European Commission

(RIGA) - The European Commission said on Thursday that Latvia's three-year, 7.5-billion-euro ($10.3 billion) bailout programme, due to wind up next month, was an example for the rest of the European Union.

Speaking after a meeting with Latvian Prime Minister Vadlis Dombrovskis, commission representative Gabriele Giudice said that the loan package, which ends formally on December 22, had proved to be "an exemplary programme for the rest of Europe."

In total Latvia has borrowed just 4.36 billion euros of the envisaged sum and the government has said no more money will be taken.

In June 2011, Latvia successfully returned to the international financial markets by issuing bonds worth $500 million.

Latvia struck the rescue deal with the European Union's executive and the International Monetary Fund at the end of 2008, amid a run on leading local bank Parex as the Baltic state's economy nosedived by what was to to be a cumulative 25 percent slump over 2008-2009.

Centre-right Dombrovskis, in power since March 2009, has won international plaudits for an draconian austerity drive meant to keep bailout funds flowing and repair state coffers.

Giudice, who was undertaking a final review of the rescue package's results along with an IMF delegation, said the picture was "very favourable with very little left to be done."

Latvia has emerged from its stark slump, and the IMF forecasts 4.0-percent economic growth this year.

Despite high unemployment, the nation of 2.2 million has not faced the anti-austerity protests seen in a handful of other embattled EU member states.

Some analysts point to the weak trade union movement and memories of Soviet-era hardships -- Latvia was ruled by Moscow for five decades until 1991, and joined the EU in 2004.

Griffiths underlined that lenders and the government agreed it was necessary to bring the country's public deficit -- the shortfall between state revenue and spending -- down to 2.5 percent of gross domestic product in 2012.

But he expressed concern that some of the poorest members of society could continue to bear the burden.

"It's important to protect the social safety nets. I'm very worried that there will be attempts to find savings there," he said.

While some economists have recommended similar measures to Latvia's in indebted nations such as Greece, others say that the poor have borne the brunt of its tax rises and spending cuts.