Latvia still keen to join single currency despite euro crisis

The Guardian ^ | 19 Sep 2012 | Ian Traynor

[Cronos]

"We don't think it's a sinking ship. We still see more positives than negatives," Valdis Dombrovskis, the Latvian prime minister

.. Governments have tumbled everywhere in a backlash against slashed spending. But Dombrovskis has inflicted arguably the most painful austerity package of all on his country and been rewarded with re-election.

As Greece pleads with its eurozone creditors for more time in meeting its fiscal adjustment targets, Dombrovskis is a fierce champion of surgical austerity applied quickly and ruthlessly.

"The most important lesson is the speed of adjustment," he said. "When you're in a situation where the markets don't trust you, you need to regain confidence quickly. Without financial stability, the banks are not lending, companies are worried, not investing, and you get a deeper recession."

With Athens trying to extend its bailout deadlines, Dombrovskis said: "Asking for two more years of delay is asking for two more years of recession. Trying to delay adjustment doesn't work."

.."Latvia decided to bite the bullet. Instead of spreading the pain over many years, you decided to go hard, and to go quickly," the IMF chief, Christine Lagarde "The achievements were incredibly impressive."

Dombrovskis is closely following trends in Estonia, also growing strongly, and is encouraged by what he sees. "The Estonians say [euro membership] is attracting foreign direct investment. If you join, you reduce transaction costs, you have price transparency. There are many practical benefits." Besides, the national currency, the lat, has been pegged to the euro since 2005. In the heat of the 2008-9 crisis, the Latvians came under strong international pressure to devalue their way out of trouble to cushion a savage recession and bolster competitiveness.

Dombrovskis stubbornly refused, instead pursuing "internal devaluation", depressing wages and conducting what he says was a 17% fiscal adjustment programme

[Cronos]

"The most important lesson is the speed of adjustment," he said. "When you're in a situation where the markets don't trust you, you need to regain confidence quickly. Without financial stability, the banks are not lending, companies are worried, not investing, and you get a deeper recession."

Wise leader -- why can't we get a President like this?

[Viennacon]

Latvia - the most naive of the Baltics.
Can you not see the black hole? Do you really want to be plunged into economic crisis with Putin breathing down your neck?

[Shadow44]

By Latvia, do they mean the public or the government?

When France and Ireland vetoed the EU Constitution by referendum, their governments ignored them and ratified it anyway.

[mazda77]

Wise leader -- why can't we get a President like this?

Hello, McFly!

We're talking about the Euro here! But then again I suppose that Obama "sounded" good to you giving that Keynote speech in 2004 too?

[Cronos]

not the most naive -- Finland and Estonia are both in the Eurozone.

Putin is already breathing down their neck and they are heavily tied in to the eurozone