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Tuesday 22.08.2017 | Name days: Rudīte, Everts

Economic Diary of Latvia. Make way for the youth!

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Author: PantherMedia/SCANPIXWhile Latvia was busy celebrating Ligo, the Committee for Economic and Monetary Affairs of the European Parliament decided to support the adoption of euro in Latvia.

Progress toward euro

The author of the report Burkhard Balz called Latvia not to slow down the initiated reforms in the job market, reducing poverty in the country and the inequality of income.

The report also references the convergence report of the European Central Bank, which mentioned concerns regarding Latvia’s long-term economic success. The Latvian government is recommended to be especially careful in terms of its fiscal policy. The government should stabilize the situation in the country and overcome the potential risks and possible loss of its macroeconomic balance.

Even though the information campaign has already begun, the author of the report calls Latvia’s government to keep in contact with the population. He believes the negative opinions about euro is the main factor that puts successful adoption of euro at risk.

Small increase, but an increase nonetheless

The Bank of Latvia reports that the residents’ credit supply on a monthly basis increased slightly this May: it was approximately LVL 9.954 billion, while that of April was under LVL 9.950 billion. The increase is estimated at LVL 4 million.

According to the data of the Bank of Latvia, there have been such bursts in the past as well, including in 2012. But they were mostly considered statistical anomalies: each one was followed by a slope. It is likely that it will happen this time as well. Companies remain cautious about their development investments. This is largely because of the instability in Europe and Russia – Latvia’s second largest export market. Nevertheless, optimism could become the force that will put a stop to this long credit slope. According to experts, the volume of issued loans is likely to start growing again in the second half of 2014.

Helping employers

This week, the government decided to spend LVL 250 million to combat unemployment of young people in 2014-2020. Half of this amount will be provided by EU funds. If the funds allot the necessary amount of money, employers will be paid extra for hiring trainees and notable subsidies for graduates.

The Youth guarantee program provides the payment of additional LVL 5 per day to employers for hiring trainees. 40% of the salaries of young graduates will be covered for the employer by the state.

The first couple of years will cost the state nearly LVL 40 million. This amount includes expenses for other measures, including corrections to vocational education programs and the procurement of new machinery for universities.

Secrets revealed

The European Commission offers to widen the volume of information that should be exchanged by fiscal services of EU members states starting from 2015. This is meant to combat tax avoidance. Information regarding all categories of income and bank account balances of EU residents is to be made known. EU Commissioner for Taxation Algirdas Šemeta says that this will allow EU countries to increase the quality of tax collection and administration: “This measure will will increase the number of tax avoidance combat tools”.

Latvian State Revenue Service (SRS) is nearly ready to complete this requirement if it ends up being supported. It is planned that this information will be automatically handed over to tax services of other EU states using special IT systems. The data will be compiled in collaboration with credit institutions .

Lately, the trend of moving away from the banking secrets and more toward openness and information exchange has been noted in the world. But legislation prevents the exchange of such information. Now banks and their clients will have to get used to the practice of such information being automatically shared. The administrative responsibility of credit institutions will only increase – they are the ones who will be required to prepare such reports and send them.


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