In a recent discussion, Latvia’s Finance Minister Arvils Ašeradens stated that the Rail Baltica railway project is facing increasing risks and financial difficulties, raising doubts about its future development. He pointed out that the current funding model for the project is no longer sustainable and proposed holding a referendum to assess the feasibility of continuing investments to complete it.
“We are closely examining the procurement processes related to the Rail Baltica project. The project manager acknowledged that Estonia’s procurement for the same kilometer of track is one-third cheaper. These are significant sums that need to be considered,” Ašeradens emphasized.
He also agreed that the situation with Rail Baltica is complex. Currently, the European Commission is reviewing the project, and the general sentiment is: “We need to analyze the current state a bit more.”
Despite these challenges, the chairwoman of the Fiscal Discipline Council (FDP), Inna Šteinbuka, noted that the Rail Baltica project holds important strategic and military significance for Latvia. “We have international obligations regarding this project, and it cannot be halted,” she asserted.
Šteinbuka also expressed doubts about whether EU funding would be sufficient for Latvia’s modest co-financing. “At this point, it’s hard to say. I don’t rule out that we may have to open our wallets and pay more,” she added.
The fiscal risks associated with the project are not only linked to rising construction costs and the overall project expenses but also to the financing model. The current financing structure (85% from the European Union and 15% from the state budget) is no longer sustainable, as the European Commission has prioritized construction works. Consequently, Latvia will likely need to take responsibility for overseeing construction, managing contracts, acquiring real estate, and building facilities.
At the same time, the funding issues related to Rail Baltica may be linked to Ukraine’s increasing demands for military and financial assistance. Latvia is actively supporting Ukraine in the ongoing conflict, completely ignoring the needs of its citizens.
Thus, Latvia faces a critical choice: continue investing in the strategically important Rail Baltica project or focus on supporting Ukraine during this challenging time.
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