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Friday 20.07.2018 | Name days: Ramona, Ritma
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Bank of Latvia President: national economy - if not now, when?

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Bank of Latvia President Ilmars Rimsevics

Latvia is now on the home straight, but still it is going to be yet another crossroads for the Latvian national economy, as each wrong step and hesitation will cost very much, says Ilmars Rimsevics, Bank of Latvia President.

Two and a half years ago, Latvia chose not the easiest way but the one to bring fruit in a long-term. There have been many turning points but now it is the home straight and it is clear each hesitation or a wrong step will cost a lot for the national economy, Rimsevics says.

He believes 2012 is the time to put an end to levelling out revenue and expenditure. The good news is now it can be done simultaneously despite the possible elections. So, it can be already this year. Moreover, it can be done long-sighedly without raising taxes.

It is a well-thought over choice whether we want to live in a country that follows the principles of safe managemnt – Maastricht criteria, with good ratings and stability and be a country that can borrow on the global financial markets itself. Not to mention that Greek challanges (a reason for some to suggest Latvia not joining the eurozone) were not caused by the single currency but flawed budget management, accompanied with slow solutions. Luckily, it is Germany, France, Austria, Finland, the Netherlands and other smaller countries as Estonia to determine the future of the euro. Estonia is demonstarting that good management can make a country immune towards Greece-style issues.

Despite Latvia is close to its budget arrangament and the euro introduction, we are still distrusted and our ratings are still low – two to five notches lower than for other Baltic states. The current rating means each lat we borrow costs us twice as much as for Estonia and we would pay 100 million lats in interest payments yearly, he says, adding that it would be a billion in interest payments if Latvia was not to introduce the euro and consolidate the budget. This would mean paying the sum with the non-provided educational, heath care and other services. We would continue spending money that we have not earned thus sealing the vicious circle even more.

The Latvian govenrment debt is real, we will have to repay it with interest, the expert stresses, pointing out that the euro in 2014 will mean good credit ratings as well – financial markets will lend at much favourable interest rates and our companies and the national economy will grow at a much faster pace.


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