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Wednesday 18.10.2017 | Name days: Rolanda, Rolands, Ronalds, Erlends

Economists: changing the Euro scenario would not be wise

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Size, capabilities and capacity of Latvia’s economy, as well as the lack of alternative solutions, increases certainty about the necessity of a timely joining of the Eurozone, as it was concluded on the Economists Association 2010 autumn conference.

Economist Uldis Osis believes that current discussions regarding the adoption of Euro have, mainly, transpired within macro-economic categories, while talks about the impact on real economy have been far and few. When comparing global regions, the expert points towards the example of the United States of America, where different signs show the stabilization of the situation and even slow development. Data shows that turnover in the US corporate sector will decrease. Nonetheless, half-year’s profits are higher than were previously projected. It was achieved by notably reducing expenses while preserving efficiency. When mentioning the integrated advantages of the American economy – corporate unification, integration, structural and organization consolidation, Osis pointed that, in Europe, these processes are seriously hampered by political, economic and business fragmentation. This is why, according to him, Europe should become united as a political, fiscal and monetary union that would follow the road to consolidate opportunities on a micro-economic level. If that happened, macroeconomic issues would be sorted in a long-term perspective, the economist believes.

On the other hand, bank analyst Olga Ertuganova reminds that joining Eurozone is test for Latvia – to see how it manages to comply with the known criteria. According to her, investment partners will seriously assess if Latvia can pass this exam. «Speaking from experience in the field of investments, people often lose money not because the strategy was poorly chosen, but because the strategy did not last until the end and initial decisions were changed. If we decide to change the strategy about adopting Euro, we need a well justified alternative scenario. I believe we have no such justified vision. Therefore, changing the scenario would be unwise,»- Ertuganova believes.

Economist Juris Cebulis compares Eurozone with «an enormous cruise ship in a stormy sea, to which the small Latvian ship has docked a long time ago». If all technical conditions are met, Cebulis mentions that Eurozone joining should be accepted not only by politicians or the Bank of Latvia, but by society as well. He believes this can be achieved by explaining the possible alternatives and consequences.

In a conversation regarding the current situation in the Eurozone, Deputy Vice President of the Bank of Latvia Andris Ruselis admits that Europe is losing competitiveness. He mentioned the original socially-economic construction and the inability to finance the 3 big whales – pensions, education and healthcare as the main reason. He believes the EU needs a peace guarantee and united currency for supporting current prosperous life. The expert is certain that pragmatism in Europe will win, which will also require a large number of compromises and resolution of fundamental questions from the EU countries.

In order to make sure the Euro project is successful, the EU needs a more rapid fiscal, economic and political integration, says Economists Association 2010 President Ojars Kehris. «The European Central Bank will need to learn from the US Federal Reserve Bank, not the other way around and take responsibility for price and unemployment stabilization in Eurozone».

During the conference, association members clarified the previously voiced 2012 GDP projection from 20.3% to 4.0%, and a small reduction in 2013 to 3.3%. The reason for this reduction is related to the economic uncertainty within Eurozone, which could affect foreign investments in Latvia, says Economists Association 2010 representative Dace Mence.


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