Monday

11th Dec 2023

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.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

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.

Spain's Nadia Calviño backed to be EIB's first female chief

With less than a month to go before the start of a new leadership of the European Investment Bank, the world's largest multilateral lender, the path seems finally clear for one of the candidates, Spanish finance minister Nadia Calviño.

Analysis

Is there hope for the EU and eurozone?

While some strengths may have been overlooked recently, leading to a more pessimistic outlook on the EU and the euro area than the truly deserve, are there reasons for optimism?

Latest News

  1. How Moldova is trying to control tuberculosis
  2. Many problems to solve in Dubai — honesty about them is good
  3. Sudanese fleeing violence find no haven in Egypt or EU
  4. How should EU reform the humanitarian aid system?
  5. EU suggests visa-bans on Israeli settlers, following US example
  6. EU ministers prepare for all-night fiscal debate
  7. Spain's Nadia Calviño backed to be EIB's first female chief
  8. Is there hope for the EU and eurozone?

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

Support quality EU news

Join us