Nordic countries pledge credit to support Latvia

STOCKHOLM — Denmark, Finland, Norway and Sweden will give credits to Latvia of up to euro1.8 billion ($2.5 billion), the finance ministers of the four countries said in a joint statement Tuesday.

The announcement followed a decision by the International Monetary Fund to approve a financial package for Latvia. The package is linked to the reform program including steep budget cuts presented by the Latvian government earlier this month.

"The program is very ambitious and shows that Latvia is firmly committed to stick to the present currency peg," the Anders Borg, Kristin Halvorsen, Jyrki Katainen and Lars Loekke Rasmussen said in a statement.

"With the implementation of the program Latvia should be in a position to weather the present turbulence and move towards a path of sustainable growth and more balanced macroeconomic developments."

The Nordic countries have worked closely with the IMF to help Latvia in the current economic crisis.

Several Swedish banks have heavy exposure to the Baltic countries, including Latvia, and could face large losses if the lat were devaluated.

In November Latvia's central bank burned through 20 percent of its foreign reserves — or euro800 million — as it intervened to support the currency and help pay external debts.

Also, the state's finances were dealt a huge blow after the government in early November agreed to intervene to prevent the country's second largest financial institution, Parex Bank, from going bankrupt.

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