Thursday

20th Jul 2017

Interview

Latvia on track to join euro in 2014, PM says

  • Dombrovskis (l) is a strong believer in fiscal discipline and austerity measures (Photo: consilium.europa.eu)

The first EU country to get a bailout and to implement harsh austerity measures, Latvia is now the bloc's fastest-growing economy and is poised to join the eurozone in 2014 - proof that spending cuts work, its Prime Minister, Valdis Dombrovskis, told this website.

"We still plan to join the eurozone on 1 January 2014. According to the Bank of Latvia already since September we meet almost all criteria," Dombrovskis said in an interview last Thursday (19 October) during the European People's Party congress in Bucharest.

Thank you for reading EUobserver!

Subscribe now and get 40% off for an annual subscription. Sale ends soon.

  1. €90 per year. Use discount code EUOBS40%
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

Despite popular opposition to the move, Latvia is obliged to join the euro when it meets all criteria, as are all EU countries except Britain and Denmark.

Its deficit and debt levels are in line with EU demands, with only inflation above the threshold, at 2.9 percent.

Dombrovskis believes adopting the euro will help the country attract foreign investors, ease transaction taxes on businesses and create price transparency, as in neighbouring Estonia, which joined the common currency in 2011.

He said the euro crisis is not a currency crisis per se: "The exchange rate to the dollar is stable, the euro share in global reserves is also stable at 25 percent."

"There are euro countries where markets are paying them to park money - Germany, Netherlands, Finland. It is not a euro problem, it is economic mismanagement in certain euro countries and that is an entirely different problem."

The 41-year old politician has no sympathy for southern demands to ease austerity.

He said it is "somewhat misleading" to believe that growth can come without the kind of painful structural reforms that Latvia had to endure: "We were badly hit by the crisis, implemented harsh austerity and now we are the fastest growing economy among the 27 members of the EU - last year by 5.5 percent, this year by 5.9."

"When a country loses control over its budget and the trust of financial markets, there is no other way. You first see what you need to do to restore financial stability, because it is a precondition for economic growth," he added.

Dombrovskis said the growth rates in his country are not based on credit or consumption, but mainly driven by an increase in exports.

"The structure of our economy is different now and we are working on it to make it more sustainable than before the crisis," he said.

According to European Commission data, fast growth rates are helping the country to catch up, but its GDP is still below pre-crisis times.

Meanwhile, unemployment is above 15 percent, lower than during the crisis (20%) but still much higher than in 2008 (6%). But these indicators are not euro-membership criteria.

Fiscal hawk

Were the tiny nation to join the eurozone as planned, it would boost the ranks of the Nordic group of fiscal hawks over the 'friends of solidarity' - mostly eastern and southern member states.

"What we need I think is smart solidarity, not throwing money unconditionally at bad balance sheets of banks or governments," Dombrovskis said.

He was also ambivalent on the demand made by euro "outs" to have equal rights when it comes to banking supervision by the European Central Bank (ECB).

"If you submit part of your sovereignty in a sense to the ECB, then of course you should be able to participate for decisions in that part," he said, while adding that by the time the new supervisory body comes into force, Latvia may already be a euro member with full voting rights in the ECB board.

Dombrovskis' name has been floated as a possible option for the centre-right European People's Party to put forward in 2014 for the post of EU commission chief.

His Polish counterpart Donald Tusk is also a possibility, as well as Luxembourg's commissioner Viviane Reding.

But the Latvian politician, up for re-election in 2014, said it is "premature" to talk about the nominations.

Latvia aiming to join eurozone in 2014

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

Latvian parliament backs IMF bailout deal

A crucial vote in the Latvian parliament on Thursday gave a renewed mandate to the government to continue talks with the International Monetary Fund and the European Union regarding the country's €7.5 billion bailout package.

Latvia submits bid to join euro in 2014

The Latvian government has officially submitted a request for the EU commission to assess its readiness to join the euro on 1 January 2014, despite public opposition to the move.

Opinion

Greece needs a new plan

Two years into its third bailout, Greece needs to combine the necessary fiscal targets with a new vision. This can be done in the context of the ongoing industrial revolution.

Opinion

Ceta and pesticides: A citizens' rights issue

The trade agreement with Canada will begin to apply on 21 September. But there is still a potential conflict on the right to data protection vs. the right to access information.

News in Brief

  1. Polish parliament adopts controversial justice reform
  2. GMO opt-out plan unlikely to go anywhere in 2017
  3. Slovak PM threatens to boycott inferior food
  4. France takes Google's 'right to be forgotten' to EU court
  5. Turkey accuses German companies of supporting terror
  6. Israel's Netanyahu caught calling EU 'crazy'
  7. UK does not collect enough data to expel EU nationals
  8. Polish president threatens to veto justice reform

Stakeholders' Highlights

  1. European Jewish CongressJean-Marie Le Pen Faces Trial for Oven Comments About Jewish Singer
  2. ACCAAnnounces Belt & Road Research at Shanghai Conference
  3. ECPAFood waste in the field can double without crop protection. #WithOrWithout #pesticides
  4. EU2017EEEstonia Allocates €1 Million to Alleviate Migratory Pressure From Libya in Italy
  5. Dialogue PlatformFethullah Gulen's Message on the Anniversary of the Coup Attempt in Turkey
  6. Martens CentreWeeding out Fake News: An Approach to Social Media Regulation
  7. European Jewish CongressEJC Concerned by Normalisation of Antisemitic Tropes in Hungary
  8. Counter BalanceOut for Summer Episode 1: How the EIB Sweeps a Development Fiasco Under the Rug
  9. CESICESI to Participate in Sectoral Social Dialogue Committee on Postal Services
  10. ILGA-EuropeMalta Keeps on Rocking: Marriage Equality on Its Way
  11. European Friends of ArmeniaEuFoA Director and MEPs Comment on the Recent Conflict Escalation in Nagorno-Karabakh
  12. EU2017EEEstonian Presidency Kicks off Youth Programme With Coding Summer School

Latest News

  1. Polish parliament steps up showdown with EU
  2. EU urges UK to clarify its Brexit positions
  3. Law expert: direct EU powers have become too complicated
  4. Winter is here for Spitzenkandidat, but he'll survive
  5. Mafia money pollutes the EU economy
  6. Central Europe should be wary of Brexit stopping
  7. Poland's 'July coup' and what it means for the judiciary
  8. Commission: clean up diesel cars, or EU agency inevitable