“If we cannot afford it, there is a possibility of freezing the project,” Māris Kučinskis, Finance Minister, told the LETA news agency.
Latvia may freeze the implementation of the Rail Baltica railway project if it fails to secure sufficient funding from the European Union, Baltic News Network reported. Securing support through the Connecting Europe Facility programme remains the most difficult issue for the country, Kučinskis explained. The Ministry of Transport and the Ministry of Finance calculated that the state could allocate roughly 150 million euros annually in co-financing.
Kučinskis said that officials could allow a few tens of millions more to cover project management, bringing the total annual state contribution to 200 million euros. That amount represents a 15% state co-financing share, bringing total yearly expenditures for the project to approximately 1 billion euros. Under this funding schedule, the railway could reach completion by 2041.
Latvia refuses to raise taxes to finance the rail line. Kučinskis questioned which government would ask the public to pay two percentage points more in value-added tax each year to build Rail Baltica.
“Of course not.”
“We also cannot divert all the remaining European structural funds away from roads, schools and other investments just to complete this railway line,” Kučinskis said. Estonia faces a similar demographic situation with low population density, but the Estonian government has borrowed less money for infrastructure. Kučinskis said that Latvia holds only about 10% of available headroom for additional government debt, while Estonia maintains considerably more borrowing capacity. “I would like to see how Estonia borrows money for this project and what its society says about it,” Kučinskis said.
Latvia must deal with its existing contractual commitments regarding the project’s overall development. The most expensive part of the construction involves building the bridge over the Daugava river near Salaspils. Kučinskis asked whether neighboring countries would come and help build it if Latvia decided not to build Rail Baltica at all, noting that Estonia and Lithuania would pretend to be angry and say that Latvia is to graze because it sits in the middle.
Kučinskis acknowledged that neighboring countries might criticize Latvia because construction started at the wrong end with foundation piles, the airport, and the station. Lithuania stands to gain a connection to the Port of Klaipėda through the railway, while Estonia prioritizes a high-speed link to Pärnu.
Connecting military training areas and ensuring access to them is considerably more important, according to the Finance Minister.
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