Optimism abounds around Latvia and euro

  • 2012-07-11
  • From wire reports

RIGA - In an interview with LETA video, Finnish European Affairs and Foreign Trade Minister Alexander Stubb said that anytime is a good time for Latvia to join the eurozone, reports LETA. Stubb believes that Latvia can join the eurozone, despite the current crisis within the monetary union.

Answering a question on whether Latvia should join the eurozone despite the current problems with the monetary union, the Finnish minister said: “Of course this is the deepest crisis the eurozone has gone through. But I believe we are starting to lose [our] perspective. Think about how many currency fluctuations European countries have gone through. Before joining the eurozone, Finland devalued its currency at least ten times. This remains a crisis for the young euro currency, which does not yet have the instruments implemented to overcome a crisis. However, looking forward, this is the right time for Latvia to join the eurozone.”

Stubb believes that Latvia is already benefiting from the euro at the moment, because many national currencies, whether they are pegged to the euro or not, are under an umbrella of sorts. “The benefits Finland gained when joining the eurozone - low interest rates, reduction in unemployment, etc. - were very positive, but the main benefit was the increase of our influence. Finland has never been as influential in the EU’s decision making process as it is now,” said Stubb, expressing confidence that Latvia will gain similar benefits.

Describing the eurozone’s future, Stubb said that he is an optimist and that the European single currency is too valuable to abandon. “The current situation surrounding the euro can be described as being a bit too hysterical, with politicians, bankers and journalists sustaining this hysteria. I am confident that the euro will continue to exist, and we are ready for future challenges.”

Mark Griffiths, the head of the International Monetary Fund’s (IMF) mission in Latvia, is optimistic about the impact of eurozone problems on the economy of Latvia. Griffiths points out in an interview, in late June, with the newspaper Telegraf that Latvia’s economy is not only connected with eurozone countries, but also with Nordic countries, Russia and CIS countries. Moreover, Latvia does not have close economic ties with Greece, Spain and other remote eurozone countries. Germany, Poland and northern Europe have not experienced any particular economic issues.

Griffiths admits that Latvia’s economy is small and will always be linked with other countries, however, there are several things that Latvia can do itself, including structural reforms, health insurance and education quality improvements, fight against corruption. “All of this can be done regardless of the rest of the world, improving the country’s economy,” says Griffiths.

At the same time, he emphasizes that the introduction of the euro must remain Latvia’s priority, since eurozone issues will be solved sooner or later.
However, the introduction of the euro is not a panacea for all problems, Latvia must still observe fiscal discipline, adds Griffiths.