Vilks confident on euro adoption target

RIGA - Despite the inflation risks and the necessity to reduce the budget deficit to at least three percent of gross domestic product, Finance Minister Andris Vilks (Unity) is certain that Latvia will be able to meet the Maastricht criteria and join the eurozone in 2014, reports Nozare.lv. Latvia needs a euro introduction strategy that will unite the people and improve the country’s competitiveness, pointed out Vilks during a debate organized by Nozare.lv.

Latvia must follow Estonia’s example, and the Baltic countries’ region will become a highly dynamic region. The minister is convinced that Latvia will be able to meet the Maastricht criteria; however, inflation will remain the main challenge. Latvia will only be able to curb inflation if society is understanding and participates in anti-inflation measures, emphasized Vilks.
The minister pointed out that a strategy for the introduction of the euro is also extremely important. The recent tax hikes contributed to a rise in inflation. Vilks promised that there will be no further tax increases.

Karlis Bauze, head of the Monetary Policy Department at the Bank of Latvia, was delighted to hear that government is aware of the inflation risks and, when making decisions, will take into account the introduction of the euro. It is highly important to fulfill the Maastricht criteria. Tax hikes have a direct impact on inflation, therefore additional tax increases would have a negative effect on inflation and Latvia’s economic growth, stressed Bauze.

Swedbank’s chief economist Martins Kazaks pointed out that the introduction of the euro would take more than just one day. “It will be affected by external factors and also by our ability to do our homework, so that even if something goes wrong, the international financial markets would know that it was not our mistake,” said Kazaks.