Support weak for 2014 euro introduction

  • 2011-09-28

RIGA - Even though Latvia’s next government will have tens, or even hundreds, of important priorities to take care of, the legislative and executive powers must realize that the introduction of the euro will be the indicator of the country’s investment policy, says Baltic Office lawyer Dmitry Skachkov, reports
Latvia’s readiness to introduce the euro will indicate that the country’s economy has stabilized and is ready for new investments and jobs, explained the lawyer.

However, Skachkov notes that the introduction of the euro is not the only indicator, since such countries as Spain and Greece have introduced the euro a while ago, but still cause concern among foreign investors.
As long as the European Union and the euro exist, Latvia’s accession to the eurozone is “imminent.” Those member states, though, who maintained their national currency, gained various advantages during the crisis. For example, Great Britain made use of the floating exchange rate of its currency to stimulate the country’s economy during the first wave of the crisis, points out Skachkov.

Latvia must think about the advantages of its national currency too. During the second wave of the crisis, if one hits, the country could still use those opportunities which it missed out on in 2008 and 2009.
On the other hand, those politicians who realize that the introduction of the euro must not become the goal in and of itself, but a bonus to the country’s investment policy, will gain the nation’s trust, whilst those who will not take into account the investors’ interests, will remain “nobodies” in Latvia’s political arena, said Skachkov.
Latvia has set itself a goal to introduce the euro in 2014.

In order to achieve it, the country must meet the Maastricht criteria, which envisage that if a country wants to join the eurozone, its budget deficit must not exceed 3 percent of GDP, its national debt must not be higher than 60 percent of GDP, and the inflation rate must be no more than 1.5 percent higher than the average of the three best performing member states of the European Union.

Nonetheless, Latvia is already closely tied to the euro currency: the official currency, the lats, is regulated through a currency board-style system with the lats pegged to the euro at a central rate of one euro to 0.7028 lats. The currency can be traded within a narrow band - Its weakest permitted end of the band is 0.7098 and the strongest is 0.6958, reports Reuters. Effectively, Latvia is already using the euro, and the direction of the lats, either up or down, is married to that of the euro.
Half, or 51 percent, of economically-active residents, however, say they do not support Latvia’s accession to the eurozone in 2014, according to a study carried out by the market, social and media research company TNS Latvia and the LNT television channel earlier this month.

Thirty-six percent of residents support the country’s accession to the eurozone in 2014. Eight percent definitely support it, whilst 28 percent would rather support it than not.
On the other hand, 51 percent of respondents are against the introduction of the euro in 2014. Thirty-one percent are rather against it, whilst 20 percent categorically object to the adoption of the euro. Thirteen percent had no opinion on the issue.
Eight hundred economically-active residents ages 18 to 55 were interviewed during the study.