Latviski English По-русски
Monday 19.03.2018 | Name days: Jāzeps

Economic Diary. Latvia. Euro – to be!

(No Ratings Yet)

The government adopted the law regarding transition to the united European currency this week. This finally sets the rules of the game, ones Latvia will be following starting from 2014. This also puts an end to the discussion on whether or not Latvia will introduce Euro.

Euro – to be!

Finance Ministry keeps on repeating: everything is planned to make sure the transition process from Lat to Euro is as seamless as possible for the average Latvian. Under the condition that all of his funds remain on his bank account on January 1, 2014, the average Latvian will not feel a thing: Lats will be automatically converted to Euro. Any remaining cash will be allowed to be converted to Euro in any bank with no commission pay within six months of the currency transition process. Places where credit institutions are not too active will be serviced by Latvian Post, but only for one month. The period of parallel currency activity will be shorter than that of countries that joined Eurozone before Latvia. Nonetheless, as the Finance Ministry reports, there is point in this: experience of those who came before shows that 95% of the population exchange the currency within the first 10-12 days.

However, transition to Euro will not be as seamless for businessmen. Prices will need to be stated in both currencies (LVL and EUR) during the first three months, as well as maintain this practice for six months after the initial currency transition. President of the Latvian Traders Association noted that this initiative will cost the industry representatives 16 million LVL. General expenses, according to him, could reach 160 million LVL. These expenses will need to be covered by the private sector using its own wallet: the draft law adopted this week states this clearly. Furthermore, the document states annual accounts will need to be stated in Euro from the start, as well as related data for the previous period.

Nonetheless, no matter how tiresome Euro adoption may be, merchants prefer clarity. There has not been much of it regarding the precise transition period. Now, on the other hand, all the rules have been set and business can begin its preparation.

Provocative marketing

While the Latvian government prepares the soil to join the Eurozone club, Latvian food producers are more concerned with defending Latvian products and initiated the campaign called “Don’t buy foreign things!” 17 firms have already joined this initiative. Among them are – Zemitāni, Lāči, Karavela, Mūsmāju dārzeņi, Latvijas piens, Rēzeknes gaļas kombināts, Užavas alus, Vinnis, Valmiermuižas alus and others.

Work with society began with a rather provocative video on YouTube. One of its authors, a well-known local creative resident Eriks Stendzinieks, believes all European countries are trying to protect their local producers, while Latvia, on the other hand, has a priority of following European directives. This is why there was great need of an initiative, to create a base for a future discussion. Currently, the goal of the campaign – is to address the flaws of public procurement regulations, to make it more protective of local business.

It should be noted that calls for buyers’ patriotism are quite often nowadays. For example, the Be American, Buy American movement became very popular. Times notes that the proportion of US residents that prefer local products grows every year.

Time to protect borrowers

Another topic that was particularly popular this week – the introduction of amendments to the Latvian legislation to protect the interests of mortgage borrowers. The Justice Ministry stepped forth with this proposal during the meeting of State Secretaries. The current legal system, according to the institution, is not secure enough for residents who buy real estate property using loans.

Particularly, authors note that credit institutions demand excessive additional precautions from borrowers during or after the issue of loans (financial guarantees, bail, separate payments). Current normative acts almost do not limit banks in making such decisions: they cannot turn to them only if the amount of bail was reduced because of changes on the real estate market. With that, the Justice Ministry offers to expand the list of cases when creditors are not allowed to present borrowers with exaggerated precaution requirements. Furthermore, the authors of the report call to increase the assessment quality of real estate value: inadequately low value could force the bank to request additional guarantees from the borrowers.

The information report states separately the problem of interest rates on credits, as well as fines. According to the Justice Ministry, the size of fines is not limited in any way. The institution offers to state the criteria of how rates are determined in contracts, as well as introduce the maximum sanction volume in the event of failure to fulfil obligations (to make sure that it does not exceed the general amount of the loan). Furthermore, it is proposed to obligate the creditor to cooperate with the borrower – particularly to set a mandatory moratorium on the adding of fines during the review of the borrower’s submitted plan to restructure obligations.

The Latvian Commercial Banks Association agrees that the country needs legislation that would regulate the sphere of mortgage crediting. The association does note, however, that the statements of the Justice Ministry have a more or less open populist undertone. For example, this relates to the statement regarding multiple and exceeding requirements on providing guarantees that cannot be backed by analysis or statistics.


Leave a reply

Week in Lithuania. Some 5,000 gather in protest rally outside Lithuania's Parliament

Some 5,000 people gathered outside the Lithuanian parliament in Vilnius on Thursday, March 15, to express discontent with the failed parliamentary vote to impeach MP Mindaugas Bastys and the performance of the ruling Lithuanian Farmers and Greens Union.

BNN summary of the week: oligarch talks’ ownership; scandals in Lithuania; Estonia wants direct democracy

BNN offers a summary of this week’s topical news in a variety of categories: Progress; Scandals; Invitation; Fight; Opinion; Decline.

Remembrance day of Latvian Legionnaires passes with shouts and two arrests

The Legionnaires’ remembrance procession in Riga on Friday, 16 March, passed peacefully. Nevertheless, several conflicts did take place among differently-minded people near the Freedom Monument. Two individuals were arrested by police.

Influenza intensity in Latvia – moderate when compared to other European nations

A comparison of influenza activity in Europe shows that it is high or very high in several countries. Latvia’s influenza intensity is considered moderate, as noted by epidemiologist Raina Nikiforova.

Hourly labour costs in Latvia grew 7.3% in 2017

Compared to Q4 2016, in Q4 2017 hourly labour costs rose by 54 cents or 7.3 %, reaching EUR 8.02. Seasonally adjusted data show identical changes – rise of 7.3 %.

Rietumu Banka claims it has not worked with high-risk clients for years

Rietumu Banka has been steadily rejecting high-risk clients for years and has significantly reduced the volume of transactions, as mentioned by the bank’s representatives.

Lithuanian and Estonian businessmen are ahead of Latvia in terms of investments

In Latvia, 36% of small and medium-sized companies have plans to invest in the development of their business this year. In Estonia and Lithuania, on the other hand, the proportion of businesses with development plans is 42% and 46%, respectively, according to results of a recent study performed by SEB Bank.

Russia pledges maximum pressure on UK amid ex-spy poisoning row

Russian top diplomat in the UK has envisaged on Friday, March 16, that the Kremlin would use maximum pressure on London as Moscow insists it has not been involved in the poisoning of a former Russian-British double agent with a Russian-made chemical weapon, as has been found by British investigators.

Latvia’s ministry: Crimea’s annexation is illegal

18 March 2018 will mark four years since the Russian Federation violated Ukraine’s sovereignty and territorial integrity by annexing the Crimean Peninsula and causing military aggression in the country’s eastern region. With its actions the Russian Federation has violated international law and basic principles of international relation, says Latvia’s Foreign Affairs Ministry.

Building gas pipe to Finland, Estonia to organise works for EUR 135 million

Continuing the works on the Balticconnector gas pipeline between Estonia and Finland, the Estonian natural gas network company Elering has stated that around 135 million euros, including a 98-million-euro funding from the European Union, will be invested in the project.

Replacement of cash registers rejected by SRS would cost half a million euros

The State Revenue Service has declined 18,000 cash registers as unfitting for requirements established by the Cabinet of Ministers. Fixing the problems found in them would cost half a million euros, as reported by LNT News.

Latvian Anti-Nazi Committee presented with protest restrictions on 16 March

Administrative District Court has compiled a shortened ruling, in which it rejected Latvian Anti-Nazi Committee’s application and preserved the decision imposed by Riga City acting CEO on 13 March 2018 on establishing restrictions on the planned gathering and protest act for 16 March unchanged.

U.S. introduces Russian sanctions for election meddling and cyber-attacks

Washington has introduced sanctions against 19 Russian individuals and five entities blaming them for attempts to sway the 2016 U.S. election and perceived cyber-attacks.

Slovakian PM Fico replaced with fellow party member

Slovakian head of government Robert Fico has stepped down after the murder of a journalist shed light on corruption in Slovakia, prompting nationwide protests. The long-standing Prime Minister had offered to resign earlier this week if the ruling coalition was allowed to finish its term.

Weekends will be cold and sunny in Latvia; next week will have volatile weather

Starting with Sunday, 18 March, air temperature in Latvia will rise above zero in most of the country, as reported by State Environment, Geology and Meteorology Centre.

Lithuania’s ruling LFGU party remains unscathed by scandals

It seems that, for now, Lithuania‘s ruling Farmers and Green Union has been nearly damage-proof despite the lambasting.

Latvian Civic Alliance: non-government sector should aim towards cooperation

Latvian Civic Alliance has invited the management of Latvia’s Chamber of Commerce and Industry to meet to discuss ongoing cooperation between organizations representing the business sector and the NGO sector.

Saeima rejects National Alliance’s proposal to make 16 March an official remembrance day

Latvia’s Saeima has decided to reject the proposal submitted by the National Alliance on making 16 March an official remembrance day.

43.6% of Latvian households have difficulties with making ends meet

In 2017 the share of households admitting that pay for usual necessary expenses with difficulty or great difficulty constituted 43.6 %, which is 1.5 percentage points more than in 2016.

Saeima voices support for Rail Baltica project’s progression

On Thursday, 15 March, the Saeima made a decision to support Rail Baltica project’s progression. In its decision, the parliament invited Latvia’s Cabinet of Ministers to provide all the necessary support for the project’s successful realization to ensure the project is realized in accordance with established terms and does not lose funding or support from the European Union, as reported by Saeima’s press-service.

Fast snow shovelling linked to cardiac fatalities, Finnish study finds

In Finish doctoral study, it has been concluded that snow should be shovelled calmly, not provoking stress and increased adrenaline in human blood that could lead to cardiac arrest.

Riga’s mayor spent at least eight million euros of residents’ money to promote himself

Over the course of the past three years, at least EUR 8 million of residents’ money has been used to promote the image of the Mayor of Riga Nils Ušakovs. This money was used to buy media, employ young members of Harmony, and finance ‘in-house protestors’ and using social networks, as estimated by Re:Baltica research journalism center.

Slovenia's head of government resigns amid protests and struggling railway investment

The Slovenian head of government Miro Cerar has stepped down from office in reaction to troubles with an expensive railway project and mounting opposition by trade unions.

NAF Commander: Latvia and Estonia have joint military procurements planned

Latvia and Estonia have joint military procurements planned, Commander of Latvia’s National Armed Forces Leonīds Kalniņš told journalists after his meeting with Commander of Estonia’s Defence Forces Riho Terras.

Estonia's switch to free higher education proved right choice, says Ratas

The switch to free higher education made by Estonia in 2013 has proved to be the right choice for a small country, even though critics have pointed to potentially less motivated students, has stated the Estonian Prime Minister Jüri Ratas.

Newest comments