Wednesday

27th Jul 2016

Latvia aiming to join eurozone in 2014

After being one of the first EU countries in need of a bail-out in 2008, Latvia is slowly recovering and aiming to join the eurozone on 1 January 2014, despite current problems in the single currency area, the country's newly elected president told this website.

"Personally I'm very optimistic we'll join the euro on 1 January 2014. It's our goal and we are working hard to implement this process", Andris Berzins said while on his first courtesy visit to Brussels earlier this week.

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He added that the accession of his country to the single currency area would be "of course dependent of the eurozone stability, which I hope will come by the end of the year".

The remarkable turn of Latvia's economy, now having a growth rate of five percent after an 18 percent contraction in 2009, is mainly due to a harsh austerity program accompanying a €7.5 billion EU-IMF bail-out agreed in December 2008.

Unemployment, however, was the price to pay, with Latvia having 16.2 percent in the first quarter of 2011, the second-highest rate in the EU after Spain. But EU statistics also show that unemployment is decreasing rapidly compared to last year, when the rate was almost 20 percent.

Berzins, a member of the Union of Greens and Farmers party, says that people living in the countryside are the most affected and that is why his message to the EU is not to cut back on farm subsidies in the next seven-year budget.

"For Latvia the Common Agricultural Policy (CAP) is very important. Particularly the direct payments per hectare, to keep employment in the rural areas", he said.

A country of 2.2 million people, Latvia still relies heavily on agriculture, with almost 50 percent of the population residing in rural areas. "And our countryside regions are the most affected by the budget consolidation process. We still have the situation that people are leaving Latvia to find better place, we have to stop that and bring them back", the president said.

As for the situation in Greece, Berzins, a former privatisation manager, said that "it would be more than useful to get answers how it happened, why they were able to go so deep and not stopped earlier. It means the European Central Bank didn't act in the best way, allowing such a high debt for Greece".

In his view, creating more control mechanisms in the eurozone is necessary to prevent another Greek scenario from happening again.

"Eurozone leaders have announced they will be very strict in this consolidation process, but it's not the easiest and it takes time step by step in reducing this big debt burden. Latvia managed in relatively short time, but the situation is still complicated and we have to find ways for future growth in our country", he noted.

As for neighbouring Estonia, who became a member of the eurozone at the beginning of this year, Berzins said that it is "too early" to say if that move had a positive impact on trade relations with Latvia.

"I hope this is a very positive example for all three Baltic states and that is an explanation why we are ready to follow. We were together, we are together and we remain the closest economic partners", he stressed.

Recently-elected Latvian President Andris Berzins spoke to the EUobserver during his first visit to Brussels.

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