Dombrovskis says to get tough on Greece

RIGA - Latvian Prime Minister Valdis Dombrovskis, who pushed through the European Union’s toughest budget austerity measures last year, said stronger sanctions are needed in the euro area to deal with members that break monetary union rules, reports Bloomberg. The Latvian government has set 2014 as the target date for its adopting the euro. The Greek fiscal crisis shouldn’t affect any country’s chances for making the currency switch, added Dombrovskis on March 26.
The Baltic region of Estonia, Latvia and Lithuania slashed government spending to cope with steep economic contraction and comply with the bloc’s fiscal rules for euro adoption.  Dombrovskis, who took office a year ago, cut the budget by about 10 percent of GDP.

“This Greece issue should not affect enlargement of the euro zone,” Dombrovskis said. “Other countries should not be punished because one of the euro zone countries is not performing. What will be needed is stronger monitoring and a sanctions mechanism.”
Latvia turned to a group led by the European Commission and the IMF for a 7.5 billion euro rescue loan in late 2008 after taking over its second-biggest bank, Parex, as it headed towards collapse.

Greece must rein in spending and bring down the EU’s highest budget deficit because “there’s no other choice,” Dombrovskis said. “It’s not very pleasant for a country to have the IMF,” Dombrovskis warned. “But once a country has come so far that it needs a lender of last resort, it cannot be too pleasant [a situation]. I think it’s a good idea to have the IMF in this Greek package because it will give more credibility with the financial markets.”

Dombrovskis said Latvia has no plans to tap international debt markets. “We are in a process to slow the absorption pace on the package as currently we have plenty of cash in the Treasury, and we do not need to pile up excessive reserves and to pay interest on them,” Dombrovskis said.