Latvia ready to advise Greece on reform

RIGA - “Greek politicians are not stupid and they understand well that Greece will have to observe international lenders’ requirements,” said Inna Steinbuka, head of the European Commission Representation in Latvia, in an interview with the business daily Dienas Bizness on July 30, reports LETA. The talk that Greece could soon quit the euro area is just empty speculation, especially because this would not be in anyone’s interest, she added.

“First of all, leaving the eurozone is not in the Greeks’ interest, and Greek leaders are well aware of that. They understand perfectly well what the consequences will be if drachmas are re-introduced. This will mean steep devaluation, inflation of simply cosmic proportions, and higher unemployment. Naturally, Greece does not want this scenario,” explains Steinbuka.

Greece’s exit from the euro area would not benefit the other eurozone members either, as such a move would seriously undermine trust in the euro.
Steinbuka noted that the International Monetary Fund and the European Union have developed a plan for rescuing the Greek economy, and set a number of requirements that Greece will have to meet.

“Latvia has already proven that meeting these requirements is not impossible, and the Greeks will come to the same conclusion sooner or later. It would not be right to compare the situation in Latvia and Greece, given the different political cultures and mentalities, as well as the public reactions to the possible changes in both countries. Therefore, the steps necessary for stabilization of the national economy in Greece will take longer to implement than in Latvia. At the same time, the Greek government as well as opposition politicians understand that reforms are inevitable and that the lenders’ requirements will have to be observed,” emphasized Steinbuka.

The opposing view is held by Latvian Finance Minister Andris Vilks (Unity). In an interview on Latvian State Radio the previous week, he said that it was time to stop clinging to the illusion that Greece could be able to solve its issues while being part of the eurozone. It is necessary to come up with a way to “throw out” Greece. “The sooner, the better,” said the minister.

Vilks explained that Greece’s economy is extremely weak and the nation’s mentality prevents such austerity measures as is done in Northern Europe. “Greece’s situation is very, very difficult,” he added, pointing out that the country’s economy has stagnated for five years. Greece’s economy is weak; drastic reforms are hampered by the nation’s mentality.

He emphasized that Latvia could provide assistance in this regard, since the country has experience in transitioning from the Soviet ruble to the Latvian ruble to the lats. Greece must not bring down Europe’s economy even further, warned Vilks.

According to the minister, Spain’s economy is stronger than Greece’s. Spain’s recovery would positively affect the entire economic situation in Europe and trust in overcoming the crisis. Italy is also experiencing considerable problems. The differences between Italy’s northern and southern regions are even greater than Latvia’s regional differences.
Nonetheless, Spain is in need of a full-scale bailout, not just assistance to its banks, believes Vilks.

The current economic crisis and lack of a clear strategy and effort at a resolution ultimately will impact Europe negatively. At a certain point, European Union member states will be forced to make painful decisions and Europe’s average standard of living will slowly decrease, says Inter-ministerial Coordination Center head Martins Krievins. “It will no longer be possible to fund this wonderful life through debts,” Krievins says.

Commenting on various global economic processes, Krievins predicts new crises. The crises will repeat cyclically, much more frequently than before. Even though Latvia has managed to return to the path of development, global changes are not over yet.

During the next seven years, the most important task is to send out a clear signal to every member of our society that it is necessary to stop expecting everything from the state. It is necessary to work, take the initiative, be responsible and invest in education and health, explains Krievins.

Vilks looks back to history for a solution. He says that if eurozone issues are not solved, a similar alliance to the Hanseatic League must be considered. The Baltic States, the Benelux, Scandinavia, Germany and Austria could be part of it.