IV - Early Emergency Funding

Prior to 2010, loan assistance to States was made primarily via bilateral agreements (to Latvia, Hungary, Romania, 1st round of Greek loan assistance).         
The European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF) are two temporary emergency funds, both resulting from the turbulent political weekend of 7-9 May 2010. On May 9, a Decision of the Representatives of the Governments of the Euro Area Member States was adopted expressing agreement on both funds.          
The EFSM is based on a ‘Council regulation establishing a European financial stabilisation mechanism’ of May 11, 2010 adopted on the basis of article 122(2) TFEU and therefore binding on all 27 member states of the EU.           
The EFSF is a special purpose vehicle created under Luxembourgish private law by the 17 member states of the Eurozone. The EFSF Framework Agreement was signed on June 7, 2010. On June 24, 2011, the Heads of State or Government of the Eurozone agreed to increase the EFSF’s scope of activity and increase its guarantee commitments.           
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What political/legal difficulties
did Latvia encounter in the negotiation of the EFSF and the EFSM, in particular in relation to (budgetary) sovereignty, constitutional law, socio-economic fundamental rights, and the budgetary process?

Neither of the instruments was seriously discussed in Latvia. Since Latvia was not yet in the Eurozone, it was not a member of the EFSF. Therefore, Latvia did not prepare an official position on the EFSF and it was not discussed in the Parliament (Saeima).

In general, from a report from an informal ECOFIN meeting, which took place 16-17 September 2011, it follows that Latvia supported the position that the Eurozone countries should do everything in order to ratify the EFSF as soon as possible. As well, generally, Latvia supported the view that at the national level the fiscal policy questions should be dealt with either in the Constitution (Satversme) or in the appropriate laws and the consolidation should continue. According to the report, special attention should be paid to the promotion of growth and implementation of structural reforms.[1]

From the EFSF Newsletter it follows that after joining the Eurozone in 2014 “Latvia will not join as a guarantor of EFSF and therefore there will be no impact on EFSF issuance and the bonds that are available for tap”.[2]

There is no publicly available information regarding any discussions concerning the EFSM.

Entry into force      
Article 1(1) EFSF Framework Agreement provides that it will enter into force if sufficient Eurozone member states have concluded all procedures necessary under their respective national laws to ensure that their obligations shall come into immediate force and effect and provided written confirmation of this. What does this procedure look like in Latvia and in what way does it involve Parliament?

Not applicable, since Latvia is not a member of the EFSF.  

Member states are obliged to issue Guarantees under the EFSF. What procedure was used for this in Latvia? What debates have arisen during this procedure, in particular in relation to the implications of the guarantees for (budgetary) sovereignty, constitutional law
, socio-economic fundamental rights, and the budgetary process?

Not applicable, since Latvia is not a member of the EFSF.  

Activation problems        
What political/legal difficulties
did Latvia encounter during the national procedures related to the entry into force of the EFSF Framework Agreement and/or the issuance and increase of guarantees?

Not applicable, since Latvia is not a member of the EFSF

Case law 
Is there a (constitutional) court judgment about the EFSM or EFSF in Latvia?

No, there has not been such a case before the Constitutional Court.          

What is the role of Parliament in the application of the EFSF, for example with regard to decisions on aid packages (Loan Facility Agreement and Memorandum of Understanding) and the disbursement of tranches, both of which need unanimous approval by the so-called Guarantors, i.e. the Eurozone member states?

Not applicable, since Latvia is not a member of the EFSF.  

Implementing problems  
What political/legal difficulties
did Latvia encounter in the application of the EFSF?

Not applicable, since Latvia is not a member of the EFSF.  

Bilateral support    
In case Latvia participated in providing funding on a bilateral basis to other EU Member States during the crisis, what relevant Parliamentary debates or legal issues have arisen?

Latvia did not provide funding on a bilateral basis to other Member States.

However, part of the funding provided to Latvia came from other Member States. Scandinavian countries (Sweden, Denmark, Finland, Norway and Estonia) together promised to provide 1.9 billion euro and the Czech Republic and Poland together with the European Bank for Reconstruction and Development – 0.4 billion euro[3] (for the details concernining financial assistance for Latvia please see Question VIII.4).

What other information is relevant with regard to Latvia and the EFSM/EFSF?

There have been some concerns that after joining the Eurozone Latvia will be forced to pay or compensate e.g. Greek debts due to its loans received under the EFSF.[4] These concerns have been one of the most popular arguments invoked against joining the Eurozone.[5] They have been answered by official economists of the Bank of Latvia by stating that Latvia did not participate in Eurozone decisions on Greek loans and loans for other countries; therefore there is no legal ground for involving Latvia in guaranteeing these loans because this financial aid was approved without Latvian participation.[6]

The same opinion has been expressed in the Journal on the Latvian Interests in the EU, issued by the Ministry of Foreign Affairs, where another senior economist from the Bank of Latvia (V. Mičūne) argued that Latvia will join the euro after the EFSF will have already finished its active work and when this fund will be simply taking care of Greek, Portuguese and Irish loans until their full repayment.[7] According to her, since at the time of the conclusion of these particular loans Latvia was outside the Eurozone, did not participate in the decision-making processes, and by the time Latvia joins the Eurozone the EFSF will already have fulfilled its primary objective, Latvia cannot and will not be involved in guaranteeing this financial aid.[8] It was recently confirmed that Latvia will not become a member of the EFSF.[9]

[1] Informatīvais ziņojums, “Par neformālās Eiropas Savienības Ekonomisko un finanšu jautājumu padomes (ECOFIN) sanāksmē izskatāmajiem jautājumiem 2011.gada 16. – 17.septembrī”. Available under:,d.ZWU p. 4-5 (last visited 23 June 2013).

[2] EFSF Newsletter. Available under : p. 2 (last visited 15 January 2014)

[3] Starptautiskā aizdevuma programma. Available under: (last visited 23 June 2013).

[4] See e.g. Latvija aizņemsies miljonus, lai uzdāvinātu Grieķijai, available under: (last visited 10 November 2013); Db viedoklis: Neesam tik bagāti, lai maksātu savus un vēl arī grieķu parādus, Dienas Bizness, 24 September 2012. Available under: (last visited 23 June 2013).

[5] See e.g. DB viedoklis: Neesam tik bagāti, lai maksātu savus un vēl arī grieķu parādus, Dienas Bizness, 24 Sep 2012. Available under: (last visited 10 November 2013).

[6] A. Bambale, Latvijas Banka: Kurš maksās par Grieķijas parādiem?

1 February 2013. Available under: (last visited 23 June 2013).

[7] V. Mičūne, ‘Eiropas Stabilizācijas mehānisma darbības principi’ in Latvijas Intereses Eiropas Savienībā 1/2013. Avaialable under: p. 35 (last visited 23 June 2013).

[8] Ibid.

[9] EFSF Newsletter. Available under: p. 2 (last visited 15 January 2014)