RIGA - Latvian Prime Minister Valdis Dombrovskis (Unity) said on Jan. 20 that he supports measures to improve economic governance within the eurozone, but there should be specific rules that dictate sanctions for member states with excessive budget deficits, reports Dow Jones. Clear rules are important, “so that we do not face arbitrary recommendations from the [European] Commission that don’t reflect the economic reality, but probably more the bargaining power of individual member states,” he stressed.
“On this, we would like to see as precise algorithms as possible... this has to be rules-based,” he said.
Dombrovskis said his government aimed to draw down less of the 7.5 billion euro IMF/EU loan package than initially planned, but that this would depend on discussions about funds earmarked for financial-sector stability and whether interest rates remain favorable for raising funds on the domestic debt market.
“If we can reduce those earmarked funds substantially, there is even a possibility that we may not draw additional loans,” he said.
The government also has to start thinking about preparing a Eurobond issue as it needs to start repaying the international loan package in 2012, he added.
Under the last review of the loan program in mid-2010, Latvia could have potentially unlocked up to 1 billion euros, but used only 400 million euros, Dombrovskis said. “If we have sufficient resources in the treasury, there is no need to take additional loans and to pay interest on them,” he said.
The prime minister has said there is solid support in Latvia for joining the euro, but he acknowledged it was harder to sell the necessary fiscal-consolidation measures to the population since the outset of the debt crisis in the single currency area. “Initially, when we set this target, it was a relatively easy story that the troubled economy of Latvia should seek the safe haven of the eurozone... It’s not as convincing a selling point [now] as it was maybe two or three years ago,” he said.