Thursday

30th Mar 2017

Rapid euro entry would help Baltic states, agency says

If the Baltic nations rapidly entered the eurozone, their current balance of payments crisis would end and credit ratings would go up, US-based rating agency Standard and Poor's said on Thursday (5 March).

"It's pretty clear that, with current debt burdens, if any of the three Baltics were in the euro, their ratings would be at least one notch higher," analyst Frank Gill said, according to Agence France Presse.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

  • The Latvian parliament: The Baltics have been hit hard by the crisis (Photo: Latvian parliament)

"If there were any indication from the European Commission or the European Central Bank of greater appetite for an acceleration of EMU [European Monetary Union] membership that would clearly have a positive impact on the sovereign ratings."

Last week, Standard and Poor's downgraded Latvia's credit rating to junk status and said that the two other Baltic nations, Estonia and Lithuania, were also in danger of heading south in the coming months.

Latvia's economy has degenerated at an alarming rate, moving from Europe's highest growth rate in 2007 to contracting by 10 percent year-on-year in the fourth quarter of 2008, with experts predicting a contraction of 12 percent in 2009. Unemployment has climbed sharply, up to 8.3 percent in January.

European Central Bank president Jean-Claude Trichet on Thursday ruled out any change to the rules to allow fast-track entry for eastern EU member states, however.

"I would say that at this stage our position is that it is extremely important that we don't change any framework," he said after a two-day meeting of the bank's governing council, where a cut in interest rates to 1.5 percent was announced.

"Sticking to the rules is very important for the stability of the European Union."

Heading into an emergency European summit in Brussels last Sunday, Luxembourg Prime Minister Jean-Claude Juncker - also chair of the eurozone group of states - said: "I don't think that we can change the accession criteria overnight. This is not feasible."

Dutch Prime Minister Jan Peter Balkenende also said at the he was against any "softening" of the entry requirements.

But EU powerhouses Germany and France seemed to open the door to the idea at the same summit.

German Chancellor Angela Merkel told reporters in the European capital that the EU "could consider" a speeding up of the entry process. French President Nicolas Sarkozy echoed Ms Merkel's comments, saying: "The debate is open."

At the moment, the rules require that countries remain in the euro waiting room for two years after meeting strict deficit and exchange rate criteria.

A number of eastern states, notably Hungary and Poland, have requested that the rules be adapted to allow a quicker entry to the safe haven of the single currency.

With weaker export markets than western member states, joining the euro would do little harm to overseas sales, but would protect their economies from currency fluctuations.

The three Baltic states, along with Bulgaria, are scrambling to maintain their currency pegs to the euro. The peg has protected them in the same way that joining the euro would, but it is expensive, as they must hold on to sufficient foreign currency reserves to ensure that all holders of its notes and coins can convert them into euros.

This in turn has stoked unrest, particularly in Latvia, as austerity measures, including sharp wage cuts, are imposed in order to maintain the peg measure.

Commission stops German-British stock merger

The decision to block the merger of the London Stock Exchange and Deutsche Boerse was expected, as negotiations between the parties broke down a few weeks ago.

SMEs lack support in EU financial plan

The European Commission's plan for a capital markets union is said to be aimed at small and medium-sized enterprises, but many could end up being left out in the cold.

Eurozone chief in 'drinks and women' row

[Updated] The Netherlands' Jeroen Dijsselbloem faces calls for resignation after saying that crisis-hit countries in southern Europe spent "money on drinks and women" before being helped by others.

Greek bailout talks to 'intensify'

Greece and its creditors will meet in Brussels later this week to unblock negotiations needed for a new tranche of financial aid, amid concerns over the country's economic situation.

Stolen Russian billions ended up in EU states

Illicit money flowing out of Russia ended up in almost every single EU state, an investigation has found, posing questions on the integrity of Europe’s banking systems.

News in Brief

  1. UK publishes 'Great Repeal Bill' plan to replace EU laws
  2. Scots share May's vision for Brexit deal, survey says
  3. Coalition talks leader expects Dutch government by summer
  4. EU commission allows ex-member Hill to join law firm
  5. Reuters: Greece and lenders move closer to deal
  6. Italy: Le Pen win would mean 'permanent political risk'
  7. Danish parliament misinformed on Nord Stream 1
  8. UK delivered its Article 50 letter to the EU

Stakeholders' Highlights

  1. Malta EU 2017Green Light Given for New EU Regulation to Bolster External Border Checks
  2. The Idealist QuarterlyCan Progressive Stories Survive Our Post-Truth Era? After-Work Discussion on 6 April
  3. ACCAG20 Citizens Want 'Big Picture' Tax Policymaking, According to Global Survey
  4. Belgrade Security ForumCall for Papers: European Union as a Global Crisis Manager - Deadline 30 April
  5. European Gaming & Betting Association60 Years Rome Treaty – 60 Years Building an Internal Market
  6. Malta EU 2017New EU Rules to Prevent Terrorism and Give More Rights to Victims Approved
  7. European Jewish Congress"Extremists Still Have Ability and Motivation to Murder in Europe" Says EJC President
  8. European Gaming & Betting AssociationAudiovisual Media Services Directive to Exclude Minors from Gambling Ads
  9. ILGA-EuropeTime for a Reality Check on International Day for the Elimination of Racial Discrimination
  10. UNICEFHuman Cost to Refugee and Migrant Children Mounts Up One Year After EU-Turkey Deal
  11. Malta EU 2017Council Adopts New Rules to Improve Safety of Medical Devices
  12. Nordic Council of MinistersNordic Energy Research: How to Reach 100 Percent Renewable Energy

Latest News

  1. Hungary attempts to stifle Soros-founded university in Budapest
  2. European right shows divisions on EU values after Brexit
  3. Transparency is key EU tactic in Brexit talks
  4. Russia building 'arc of iron' around Europe
  5. Französische und deutsche Wahlen 'entscheidend' für Putin
  6. EU trying to salvage US deal on data privacy
  7. MEPs draw 'red lines' on Brexit deal
  8. MEPs call for reset in relations with Belarus