RIGA- International Monetary Fund Managing director Dominique Strauss-Kahn detailed a 7.5 billion euro stabilization package agreed between the IMF and the Latvian.A press release from the IMF headquarters said that the plan still needs approval from management and executive boards, but that the 7.5 billion euro is a multinational stabilization package. It also includes a 27 month standby arrangement for 1.7 billion euro.

Contributing to the package are World Bank with 400 million euro, Czech Republic with 200 million euro and Estonia and Poland each contributing 100 million euro.

The EU’s contribution is still waiting approval which will be voted on mid January.

On Dec. 20, local and international economists expressed their shock at the large size of the package.

“It is much larger than anyone expected, equivalent to around half of Latvia’s external financing requirement,” Neil Shearing of London-based Capital Economics explained to Deutsche Presse-Agentur.

“While the massive size of the package should prevent widespread defaults by Latvian firms and banks, the conditions attached will deepen the recession next year. There’s a good chance that GDP could
contract by 10 per cent,” Shearing said.

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