LOAN AGREEMENTbetweenTHE EUROPEAN COMMUNITYas LenderandTHE REPUBLIC OF LATVIAas BorrowerTHE BANK OF LATVIAas Agent to the BorrowerEUR 3 100 000 000_ January 2009This Loan Agreement (the Agreement) is made by and betweenthe European Community (hereinafter referred to as the EC or the Lender), represented by the Commission of the European Communities (hereinafter referred to as the Commission), andthe Republic of Latvia (hereinafter referred to as Latvia or the Borrower), represented by the Minister of Finance, Mr Atis Slakteris,andthe Bank of Latvia acting as Agent on behalf of the Borrower (hereinafter referred to as the Borrowers Agent), represented by the Governor of the Bank of Latvia, Mr Ilmrs Rimvis.PreambleWhereas: (1) Council Regulation (EC) No 332/2002 of 18 February 2002 establishing a facility providing medium-term financial assistance for Member States balances of payments (OJ L 53, 23.2.2002, p. 1) empowered the Commission on behalf of the EC to contract borrowings on the capital markets or with financial institutions with the aim to grant loans to one or more Member States which are experiencing, or threatened with, difficulties in their balance of current payments or capital movements; (2) Latvia has requested medium-term financial assistance;(3) The Council, by its Decision 5255/09 of 20 January 2009 (hereinafter referred to as the Decision) decided to grant Latvia under Regulation (EC) No 332/2002 a loan amounting to a maximum of EUR 3 100 000 000 with a maximum average maturity of seven years. The loan shall be made available in maximum six instalments;(4) The loan is granted in conjunction with a loan from the International Monetary Fund of SDR 1.5 billion (around EUR 1.7 billion) under a Stand-by arrangement approved on 23 December 2008. In addition, the Nordic countries (Sweden, Denmark, Finland, Norway and Estonia) are to contribute EUR 1.9 billion together, the World Bank EUR 0.4 billion, the European Bank for Reconstruction and Development, the Czech Republic and Poland a total of EUR 0.4 billion, bringing the total assistance to EUR 7.5 billion over the period to the first quarter of 2011;(5) The loan is linked to economic policy measures designed to support Latvias balance of payments sustainability as determined in Articles 2 and 3 of the Decision;(6) The economic policy conditions to be respected by Latvia are laid down in the Memorandum of Understanding signed on _ January 2009 between the Commission and Latvia and the Bank of Latvia and in subsequent (Supplemental) Memoranda of Understanding, if any (hereinafter referred to collectively as Memorandum of Understanding);(7) The first instalment shall be released subject to the entry into force of the Memorandum of Understanding and this Loan Agreement, as well as based on the Latvian authorities economic stabilisation programme (Economic stabilisation and growth revival programme) and amended budget for 2009, both adopted by the Latvian Parliament on 12 December 2008;(8) The release of instalments subsequent to the first one is conditional upon the Commission deciding favourably, after consultation with the Economic and Financial Committee, on the basis of the findings of its verification that the economic policy of Latvia accords with the adjustment or back-up programme or any other conditions laid down by the Council or in the Memorandum of Understanding; (9) The Commission will launch in due course, on behalf of the EC and after written agreement by the Borrower on the main terms as set out hereinafter, bond issues or any other appropriate financial transactions for the principal amount in Tranches, the proceeds of which shall be on-lent to the Borrower; (10) The contracts relating to the bond issue or to any other appropriate financial transaction, including a possible interest rate swap, will constitute an integral part of this Agreement as provided hereinafter;(11) The European Central Bank shall be acting as an agent to the Lender (hereinafter referred to as the Lenders Agent);(12) Appropriate measures related to the prevention of, and the fight against fraud, corruption and other irregularities affecting the assistance shall be provided for by the authorities of the Borrower;(13) The Commission, including the Anti-Fraud Office, shall have the right to perform on-the-spot checks and inspections, and the Court of Auditors the right to carry out audits, where appropriate, on the spot.Now, therefore, the parties hereto have agreed as follows:Article 1 Loan Amount 1.The Lender will make available to the Borrower a loan of a total principal amount of up to EUR3 100 000 000 (three billion, one hundred million) in maximum six instalments (each hereinafter referred to as “Instalment”, collectively all such Instalments hereinafter referred to as the Loan), s