Keep the motor running, says Rimsevics

  • 2012-06-13
  • From wire reports

RIGA - One of the biggest challenges for Latvia and Prime Minister Valdis Dombrovskis (Unity) will be joining the eurozone in 2014, and if the prime minister fails to do so, it will be a huge blow to his political image and will lead to questions regarding his legitimacy, political scientist Ivars Ijabs says, reports LETA.
“Dombrovskis’ government is stable because since 2009, when he took over as prime minister, we have not seen any serious alternative for who would have the desire to head the government. There could be people who object to Dombrovskis for one reason or another, but I do not believe that any other candidate would garner a majority in this parliament,” the political observer emphasized.

Ijabs points out that one of the biggest challenges for Latvia and Dombrovskis will be joining the eurozone in 2014. “We have all dreamed of joining the eurozone since 2003, when the lats was pegged to the euro. If we fail to introduce the European single currency, this would be a huge blow to Dombrovskis,” Ijabs added.
Public support for switching from the lats to the euro in Latvia has reached a record low, with only 15 percent of residents supporting the idea, according to a study carried out by SKDS this past April.
At the end of May, the European Central Bank said that none of the eight countries on the waiting list to adopt the euro meets all the required membership criteria at the moment.

Mark Griffith, the head of the International Monetary Fund’s mission in Latvia, spoke on June 5 at the Riga conference on the recovering economies of the Baltic States, declaring that “mission impossible” came true, referring to Latvia’s achievement in overcoming the crisis.
Griffith named three challenges Latvia now has – implementing the euro, sustainable growth and combating inequality among the populace. He mentioned that both Latvia and Lithuania are at high risk for poverty, that inequality is at a serious level. He also pointed to a high unemployment rate in all three states, and the high risk of long-term joblessness, which must be averted.

During a meeting with European Commissioner for Economic and Monetary Affairs Olli Rehn in Riga on June 5, Prime Minister Dombrovskis said that he expects the European Commission and the European Central Bank to observe consistency when evaluating how countries are implementing the Maastricht Criteria. Dombrovskis confirmed to the commissioner that Latvia is committed to fulfilling the Maastricht Criteria to qualify to join the eurozone in 2014.
Rehn said during the meeting that Latvia can be assured of such consistency. He also congratulated Latvia on the successful conclusion of the country’s loan program, which allowed Latvia to create a stable foundation for growth.
The commissioner added that these achievements give Latvia the responsibility to continue creating a sustainable fiscal policy, with the ultimate aim of reducing the budget deficit.

In an interview on the June 7 edition of the Latvijas Neatkariga televizija (LNT) news program ‘900 Seconds,’ Bank of Latvia President Ilmars Rimsevics said that if Latvia delays in introducing the euro, the country might not be given another opportunity.
Recently, several politicians have stated that Latvia must continue to implement the Maastricht Criteria, but should not rush into joining the European single currency in 2014, taking into account the eurozone’s economic problems. “It is a club where members wish to see countries with strong backbones,” the head of the central bank said, warning that if Latvia begins to hesitate, the country might not be given another opportunity to join.

Rimsevics said that there are various scenarios and points of view being made regarding the expansion of the eurozone. He said that there is a possibility that the eurozone will not let in new members in the upcoming years, and instead will try to solve its internal problems. However, there is also the point of view that by adding new, talented, strong and intelligent members, this could inspire the existing members. Rimsevics also added that Latvia has supporters amongst eurozone members.

“It is important that we do not break down on this road,” he said.
Commenting on the public’s skepticism regarding the euro, Rimsevics noted that this point of view has been created because of the negative news of what is happening within the eurozone at the moment. At the same time, he said that people are not against introducing the euro at all, but wish to wait and see what happens next.
The bank governor said that people still trust the euro, which is shown by the fact that half of deposits in Latvia are in euros.

The eurozone is not closed, European Central Bank board member Jorg Asmussen emphasized in an interview with the daily Diena. “There are demands to meet the convergence criteria on a sustainable basis. You are familiar with all of them. The countries which meet these criteria are more than welcome to join the eurozone,” explained Asmussen. “The convergence criteria and the rule-based system have not changed over the past few years. Moreover, these rules are economically beneficial for all countries striving to join the eurozone.”

Commenting on Dombrovskis’ concerns about potential manipulation when applying the Maastricht criteria to Latvia, Asmussen says that he does not know what Dombrovskis means by this statement. “I will repeat once again - the criteria are the way they are. The ECB is a fully independent institution and the criteria are applied equally. We have just published our latest convergence report, which indicates that Latvia still has a certain road to go,” he emphasized.
Regarding Latvia’s chances of joining the eurozone in 2014, Asmussen refused to comment on any specific date. “My ECB board member powers will expire on December 31, 2018. I am convinced that there will be more eurozone members by then.”