Kalvitis promises to tackle runaway inflation

  • 2004-12-09
  • From wire reports
RIGA - Upon taking office last week, Prime Minister Aigars Kalvitis said that the new right-wing Cabinet would rein in the country's inflation so that price growth met the EU's Maastricht criteria by the end of 2005.

Kalvitis told Latvijas Radio that he supported recent moves by the Bank of Latvia to raise interest rates. He did, however, warn Latvians that curbing inflation - which is currently running at over 7 percent - was a long-term issue that couldn't be solved overnight.

"You can't kill inflation in a day. We have set the tough goal of reaching the Maastricht criteria by the end of next year," he said.

The prime minister explained that one way to cut the incessant price rises could be a freeze on all wage increases. Admitting that this would be an unpopular move and rather tough "to pull through politically," he stressed that it had been done before in other countries - for example, Ireland.

With the government promising wage increases for medical staff and teachers next year, proceeding with any such wage-freeze would be tough, Kalvitis said.

He said that the pressure of inflation in Latvia should drop after the national currency is pegged to the euro next year. Currently it is pegged to a basket of currencies - the dollar, the euro, the sterling and the yen.

Some analysts have voiced concern that inflation may have spun out of control and the country may not be able to rein it in for the introduction of the euro, which was planned for 2008.