Opin­ion: Latvia’s five years in Euro­zone should be con­sid­ered suc­cess­ful

Baltic News Network - - Front Page -

In spite of the ini­tial dif­fi­cul­ties, Euro­zone’s cre­ation should be viewed as a story of suc­cess. Ad­di­tion­ally, the five years Latvia has spent in Euro­zone should be con­sid­ered suc­cess­ful, says Bank of Latvia Coun­cil mem­ber Mār­tiņš Kazāks.

At the same time, he ad­mits that 20 years ago, when Euro­zone was first es­tab­lished, many did not imag­ine how a com­pli­cated project it would turn out to be. «As the pre­vi­ous cri­sis had demon­strated, a num­ber of prob­lems were not re­solved, as no one had ex­pected them. We have to keep in mind that this is a very com­pli­cated project and that af­ter 20 years it still ex­ists, euro is the sec­ond largest in­ter­na­tional re­serve cur­rency, and the coun­tries that have joined it have found suc­cess,» says Kazāks.

He also notes that af­ter the last cri­sis there is still a lot left to do to im­prove Euro­zone. Nev­er­the­less, a lot has al­ready been ac­com­plished. The cri­sis also made it clear that Europe is in­ter­ested in pre­serv­ing the mon­e­tary union. «This does not mean ev­ery­thing is done. Riga is not yet ready. There are still many, many chal­lenges ahead,» says Kazāks.

He stresses that mem­ber­ship in Euro­zone is im­por­tant for small and open economies like Latvia. «I would com­pare Latvia’s mem­ber­ship in Euro­zone with in­su­lat­ing your home. There is less draft, and less warmth is lost. Still, it does not mean the house is warm. Get­ting a fur­nace is our own re­spon­si­bil­ity. With that, Euro­zone does pro­vide us with more com­fort and pro­tects us from many ex­ter­nal threats, but mak­ing the house warm is for us to do,» says Kazāks.

He says anal­y­sis from the Bank of Latvia show that af­ter join­ing Euro­zone, Latvia has seen im­proved em­ploy­ment and in­vest­ment vol­umes, as well as im­proved and bet­ter eco­nomic growth rates. Latvia has also be­come more sta­ble af­ter the cri­sis. Mem­ber­ship in Euro­zone has also re­duced Latvia’s open­ness to dif­fer­ent spec­u­la­tive at­tacks. The Bank of Latvia has an­a­lysed that the coun­try’s credit rat­ing’s in­crease by two stages has re­duced the value of state bonds by 150 base points, which has helped Latvia save 0.6% of GDP over the past five years. Sav­ings on cur­rency ex­change have amounted to EUR 70 mil­lion an­nu­ally, which is roughly 1.5% of GDP over the past five years. If Latvia was out­side of Euro­zone, in­vest­ments would have been 5% smaller, the num­ber of un­em­ployed peo­ple larger by 5,000, and GDP per capita – 164 euro smaller.

The mem­ber of Bank of Latvia Coun­cil also said the first five years proved that many of the warn­ings voiced five years ago about Latvia’s mem­ber­ship in Euro­zone were no more than ur­ban myths.

«But as for Euro­zone not re­solv­ing all of Latvia’s prob­lems… Well, of course! How can Euro­zone help with im­prov­ing Lat­vian res­i­dents’ health? How can Euro­zone help with ed­u­ca­tion qual­ity? How can Euro­zone help with taxes or re­gional pol­icy? Euro­zone is only one of the el­e­ments in the ar­se­nal of tools ac­ces­si­ble to us. With that, op­por­tu­ni­ties pro­vided by Euro­zone are very good. Nev­er­the­less, we have to con­clude that nei­ther we in Latvia, nor Euro­zone are suf­fi­ciently swift to use ev­ery­thing at once. There is still a lot to do,» says Kazāks. As for the fu­ture of Euro­zone, Kazāks stressed that re­forms should be con­tin­ued. «Euro­zone is a mon­e­tary union, and it is there­fore im­por­tant for all play­ers to play by the same rules. As we can clearly see, this is not the case. Euro­zone con­tains very dif­fer­ent economies. If we look at struc­tural re­forms more widely, we have to men­tion the labour mar­ket, pro­duc­tiv­ity, busi­ness en­vi­ron­ment and a num­ber of other mat­ters. All coun­tries have ob­jec­tives – and it’s an end­less road. Ad­di­tion­ally, this does not de­pend on whether or not they are part of Euro­zone. Euro­zone plays a more im­por­tant role than it would if they still had their own cur­rency. If we look at Euro­zone as a whole, the top­i­cal mat­ters be­come clearly out­lined – bank­ing unions and the mat­ter of a sin­gle cap­i­tal mar­ket. Europe still plays a ma­jor role for banks and there is no shortage of mar­ket play­ers. The fi­nance mar­ket in Europe is very frag­mented among dif­fer­ent coun­tries,» says the coun­cil mem­ber of Latvia’s cen­tral bank.

He also says Latvia’s re­cent ex­pe­ri­ence in the bank­ing sec­tor and the re­port from Money­val clearly show that money laun­der­ing and ter­ror­ism fi­nanc­ing pre­ven­tion lacks a joint Euro­zone reg­u­la­tion.

«Still, if we look at this mat­ter glob­ally, Euro­zone’s for­ma­tion can be con­sid­ered a story of suc­cess. Yes, there are some dif­fi­cul­ties, but a lot has been done al­ready to make Euro­zone stronger and more re­sis­tant against crises. What will the fu­ture bring? We will see!» says Kazāks.

Evija Tri­fanova/LETA

Newspapers in English

Newspapers from Latvia

© PressReader. All rights reserved.