Latviski English По-русски
Sunday 25.03.2018 | Name days: Māra, Marita, Mārīte

Economist: stubborn exchange rate maintaining to result in stagnation

(+1 rating, 1 votes)

Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RU, Janis Oslejs

Janis Oslejs

Stubborn holding of the exchange rate during the crisis results in huge unemployment and misery leading to extreme ideas, press freedom threats, irregularities and economic stagnation, points out the economist and Head of SIA Primekss Jānis Ošlejs (Oslejs) in such a way responding to the ex-Prime Minister and the European Parliament Deputy Ivars Godmanis’ statement that Latvia cannot implement controlled lat devaluation.

Godmanis expressed sharp criticism of the lat devaluation supporters, for instance, the economist Oslejs last week, in an interview to the newspaper Vesti Segodņa supplement Delovije Vesti, pointing out that these people have not been responsible for anything and adding that almost all controlled devaluation cases have failed, for example, in South Asia and many European countries.

Oslejs points out countries that are now facing financial difficulties, have often opted to devalue the currency. According to the International Monetary Fund (IMF) estimates, devaluation has occurred more than 140 times throughout the world since 1970. Oslejs considers Latvia has to devalue its currency as well; thus, gaining the possibility to perform cash emissions. He is convinced before devaluation Godmanis could have converted the euro loans in lats in accordance to law, while the resulting banks’ losses could be partly covered by the international lenders’ granted loan.

The former Prime Minister could have used the money gained by the devaluation to carry out structural reforms – to reduce the bureaucratic apparatus and increase investments in infrastructure. For instance, in the health care sector where small hospitals could have been closed, while investments could be placed in centralised hospitals. Similarly, financial resources for small hospitals restructuring in health care centres and medical tourism private clinics could have been allotted. Also the swollen state apparatus should have been reduced, increasing money for road construction and science. Poorly visited secondary schools should have been closed, investing in teachers remuneration and further education. Godmanis could have invested in risk capital funds for Latvia’s industrialization to create innovative, exporting companies. These would have been sustainable structural reforms boosting Latvia’s competitiveness. But currently there are no structural reforms – only cuts, because of insufficient funds for compensatory investments, the economist emphasizes.

Oslejs thinks Godmanis chose unusual crisis solving mechanism, not been carried out since 1930’s, with extraordinary risks – to maintain the lat rate flat.

The logic of exchange rate preservation requires low import. Import can be stopped by reducing the purchasing power. So Godmanis’ idea, to which IMF finally reluctantly agreed, was to cut wages, pensions and other social benefits in order to stabilize the budget and reduce purchasing power, boost domestic consumption taxes and cut government spending. Moreover, public investments in the infrastructure would be stopped, Oslejs considers, emphasizing the bizarre and irresponsible course set by Godmanis has resulted in Latvia in the deepest crisis in the world.

Oslejs appraises the Prime Minister Valdis Dombrovskis government’s skills to stabilize the economy efficiently; however, the continuation of the current Latvian economic course will lead to a hopelessly slow growth that is similar to stagnation. The only justification for such a policy is the hope for euro. Unfortunately, even Godmanis is forced to admit that Latvia will have too high inflation in 2014 due to the tax rise, consequently, the chances of joining the eurozone will be threatened. Moreover, the total debt level might exceed the one requested by the euro criteria. At the moment, economists in circles related to Brussels consider the eurozone entrance criteria will be changed, Oslejs says.

He indicates the eurozone needs serious reforms before taking on new member countries. I support the European integration, but not on completely economically incorrect foundations, and currently the euro is wrongly built, the economist asserts.

Leave a reply

MEP: operations of certain banks in Latvia ruin the country’s reputation

Money laundering is a problem in Latvia, because the activities performed by certain banks ruin the country’s reputation, said member of the European Parliament Krišjānis Kariņš in an interview to Rietumu Radio.

Harmony believes education only in Latvian language is discrimination

Members of Harmony’s Saeima faction have turned to President of Latvia Raimonds Vējonis with a request to halt the parliament’s newly approved amendments to the General Education Law and Education Law regarding education only in Latvian language.

Opinion: UFG and For Latvia and Ventspils were in favour of Vejonis congratulating Putin

Latvia’s President Raimonds Vējonis sent his congratulation to the newly-elected President of Russia Vladimir Putin in order to secure political capital for himself during next year’s presidential elections, says Assoc. Prof. Ojārs Skudra from Social Sciences Faculty of the University of Latvia.

Commissioner: Latvia should provide a clear response to situation in its financial sector

The scandal in Latvia’s financial sector has been reported far and wide in the European Union. This is why it is highly important for Latvia to provide a clear reaction to all this, said Vice-President of the European Commission for Financial Stability, Financial Services and Capital Market Union Valdis Dombrovskis.

Don't joke about bombs at Tallinn Airport, they take it seriously

Estonia's largest airport in Tallinn has from early 2017 received 14 threats of the presence of explosives in the air-travel hub, most of which have been discovered to be just jokes said at the wrong place.

Minister: learning in a single education system using state language is only obvious

Education using state language is our way of ensuring sustainable development of our nation, says Latvia’s Education and Science Minister Kārlis Šadurskis.

Estonian banks close foreigner accounts in wake of ABLV closure

In the wake of the closure of ABLV Bank in Latvia and alleged money laundering via the Estonian branch of Danske Bank, lenders in Estonia are closing the accounts of foreigners, but this threatens the country's successful e-Residency programme aimed at attracting foreign investors.

Latvian Saeima conceptually supports limiting the Bank of Latvia governor’s authority

The Saeima has supported amendments to the Law on the Bank of Latvia in the first reading. Amendments provide that the term of the bank’s governor, his deputy and council members will be five years, as reported by Saeima’s press-service.

Baltic shareholders agree to keep Baiba Rubesa in charge of RB Rail

RB Rail CEO and board chairperson Baiba Rubesa will keep her post. This was decided by shareholders during the 22 March meeting. «The supervisory council had previously mentioned the CEO’s contribution to the company’s development. Still, we intend to find solutions and continue realizing Rail Baltica project,» said RB Rail Supervisory Council chairperson Riia Sillave.

Syrian rebel groups in eastern Ghouta announce ceasefire

In the besieged eastern Ghouta territory in Syria, which has been under heavy air strikes and artillery fire for about a month, several opposition rebel groups have agreed to ceasefire.

EU member states on Skripal attack: «Highly likely» Russia was responsible

The European Union has stated it would recall its ambassador to Moscow for consultations after heads of member states and their governments agreed it was very likely that Russia was responsible for the attack with a chemical weapon on a Russian-British double agent.

Weather to remain cold in Latvia until Easter; more snowfall expected

Weather in Latvia is expected to become cold again after a brief period of warmth. Air temperature will drop again at the beginning and the middle of next week; some areas may experience frost again, as reported by Latvian State, Environment, Geology and Meteorology Centre.

Farmers in Latvia dissatisfied with resolution of electricity-related problems

Two months have passed since farmers in Latvia had received unjustifiably large electricity bills. Countless meetings and discussions have taken place in those two months. Unfortunately, no decisive measures have been undertaken to resolve the problem. Farmers are confused with decision-makers’ incisiveness in a matter important to the national economy, as noted by the Farmers’ Saeima.

Life after 25 May: is this the end for free publication of photo galleries from events?

Many of us like to check out photos from concerts, conferences or sport events on gallery portals and social networks to have a look at guests of those events. However, after 25 May, when General Data Protection Regulation (GDPR) comes into force, the situation will no longer be the same.

Saeima to establish legal framework for Baltic cooperation in disaster prevention

On Thursday, 22 March, Latvian Saeima supported a legislative draft, ratification of which will help create legal framework with other Baltic States in prevention of disasters, as reported by the parliament’s press-service.

Number of complaints with postal services on a rise in Latvia

Public Utilities Commission has compiled information about complaints submitted by residents in regards to postal services in 2017. The number of complaints has increased alongside opposing views about package terminals – the regulator has received 37 complaints in total.

Output of livestock products in Latvia increased in 2017

Compared to 2016, output of meat grew by 4.6 % and output of milk by 1.4 % in 2017. In 2017, in Latvia 91.2 thousand tonnes of meat were produced, which is 4.0 thousand tonnes or 4.6 % more than in 2016. The most significant increase was observed in the output of poultry (of 11.3 %) and pork (4.7 %).

Turkey's offensive in Syria condemned by NATO ally Germany

Angela Merkel, the head of the German federal government has stated that Turkey’s military offensive in the northern Syrian town of Afrin was unacceptable and she blamed Russia for simply watching, while attacks by Syrian government forces on besieged eastern Ghouta continue.

Finance minister still believes tax reform in Latvia has brought results

«The tax reform has given us the results we had expected, especially in regards to combating envelope wages,» said Latvia’s Finance Minister Dana Reizniece-Ozola in an interview to 900 seconds programme of LNT.

Planned hospital reorganisation in Lithuanian regions irks both mayors and patients

If the plan of the Lithuanian Ministry of Health to overhaul treatment services in the provinces does not hit a snag, the rural hospitals will be soon providing only essential care and nursing, the focus will be on out-patient care and treatment will be available only in larger county hospitals.

Ventspils beach high in popularity this week; Lembergs gets spotlight time as well

Ventspils ended up in the spotlight in an unusual way this week: seals washed up on the beach there. Animal Freedom emphasizes that human contact with baby seals would hurt them. Residents are asked to maintain at least 50 m distance from them. However, the suspended Mayor of Ventspils Aivars Lembergs decided to take photos with baby seals and publish them on his Facebook profile.

Ombudsman: problems in nursing homes and social care centres are associated with lack of funding

Problems in nursing homes and social care centres are largely associated with lack of funding, because it is not possible to perform high-quality work using currently available resources. This is the responsibility of ministries and the government, as ombudsman Juris Jansons mentioned in an interview to Latvijas Radio.

Estonian music authors receive record royalties for 2017

The organisation, which is tasked by collecting royalties for local and foreign music in Estonia, the Estonian Authors' Society, has received six million euros in royalties in 2017, which is its record level.

Facebook sorry for permitting exploitation of 50 million user data in politics

Facebook CEO Mark Zuckerberg has apologised for the social network failing to ensure enough privacy to its users that allowed for data on about 50 million of its users to abused by a political consultancy firm.

Zhdanok’s replacement to promote non-citizen matter in European Parliament

Miroslavs Mitrofanovs, who has taken Tatyana Zhdanok’s place in the European Parliament, plans to promote the matter of non-citizens in the institution.

Newest comments