Construction, EU – Baltic States, Financial Services, Funds, Investments, Latvia, Transport

According to Finance Ministry Deputy State Secretary Armands Eberhards and Transport Ministry State Secretary Ilze Aleksandrovica, the matter has become the main apple of discord in informal talks on Europe's investments in 2014-2020.

Latvia wants to continue renovating roads at the expense of Europe's next planning period. Out of LVL 3 billion available in 2014-2020, the country plans to allot around LVL 500 million for roads, including LVL 245 million for main highways, LVL 166 million for regional roads, LVL 51 million for local roads and LVL 90 million for Riga bridges and overpasses.

However, the European Commission wants to put an end to such practices. Europe has been skeptical about road investments for a long time, admits Aleksandrovica. Latvia will have to strongly defend its stance. The Commission does not object to investing in main highways. However, the Commission believes that Latvia should invest in regional and local roads from its own budget.

The Commission prioritizes railways, particularly – the high-speed railway project Rail Baltica.

Latvia follows these recommendations at least partially, envisaging significant funds for the electrification of the joint-stock railroad company Latvijas dzelzcels, however. Rail Baltica" is not among current plans. Latvia hopes that the project will be funded by the CEF and the country will not have to sacrifice road renovation funds.

Aware that the risk of not receiving Europe's money for roads is considerable, Latvia promises to invest its budget funds in regional and local roads – LVL 200 million in seven years, trying to appease the Commission.

However, even if Latvia receives Europe's funding, road renovations may not begin in 2014. According to the Finance Ministry's plan obtained by "de facto", all bureaucratic procedures will be concluded only in August 2014.

Formally, uncertainty regarding Europe's funding for Latvia's roads will remain until the end of the year. Latvia and the European Commission will sign their final agreement on joint investment goals and investment amounts only in December. However, Latvia will most likely not have to wait that long, an informal agreement could be achieved already in summer.

Its outcome will affect the 2014 national budget, since politicians may have to choose between pension indexing and road renovation.