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Tuesday 17.07.2018 | Name days: Aleksejs, Aleksis

Economic Diary. Euro on board!

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Аuthor: PantherMedia/SCANPIXMost of this week’s events have been more or less related to Latvia’s upcoming joining of the Eurozone.

Low level of preparedness

There is less and less time to prepare for the currency transition period, but the readiness of residents and enterprises is still far from satisfactory. It is said to be 31 to 46 points out of the possible 100.

This is stated by the results of the survey carried out by TNS and Swedbank this March. The readiness index was calculated based on the residents and enterprise managers survey about the level of their knowledge and attitude towards the planned currency exchange.

Residents have a lower readiness index than companies do. This is logical: unlike companies, residents will go through the currency exchange process more easily. If residents keep their savings in banks, they will be automatically converted. It is important to have cash money transferred well in advance.

Only 48% of respondents in the corporate segment believe themselves to be well informed about the Euro transition process. At the same time, the attitude index of the respondents towards the new currency is close to that of their general level of knowledge of the topic – 46%. The level of companies’ preparedness is not too high as well. Only 12% of entrepreneurs have begun adapting their IT systems to the new conditions; 32% more are planning to do this in the near future. 17% of companies have developed a plan, while 10% admit they have yet to do anything.


Meanwhile, companies should be more responsible about the currency exchange process. Section 22 of the Law on the Introduction of Euro states: the nominal value of State borrowings and loans, and guarantees shall be expressed in Euro and Euro cents. The compliance with the law for already working companies means additional, though small, expenses.

The conversion will not be automatic. The same law dictates that the value of shares for enterprises should be stated in solid numbers, without the use of santim. This also means the preservation of the influence of all participants. This is why owners of firms are expected to calculate and approve the changes in their capitals. The current standard of 2 000 LVL will turn into 2 800 EUR.

However, in order to add these changes to the Enterprise Register, a state duty of 30 LVL needs to be paid. According to Lursoft, there are 55 thousand active companies in Latvia. This means the state’s revenue will be 1.65 million LVL.

With that, the massive re-registration of legal persons’ addresses in regard to the administrative-territorial reform was free of charge. It would be logical to do the same with the Euro transition project, but the Justice Ministry, which is in charge of developing amendments to subsections of the law, is not planning on refusing the practice.

Why did the PM travel to France?

PM Valdis Dombrovskis is not the least bit interested in such practical matters. He is more interested in general management, so to say. The European Commission and the European Central Bank will announce the final decision this July. Until then, Latvia’s government needs to convince the opposition of the Eurozone that Latvia is a good candidate. This is why Mr Dombrovksis has recently visited France, where he had a meeting with the French PM Jean-Marc Ayrault and the President of France Francois Hollande, as The Economist reports. France and Spain are tow of the largest sceptics about allowing Latvia to join the currency club.

The Economist reminds that Latvia is the “Baltic story of success”. It does note, however: it is still the third poorest country in the EU. One more reason to worry was voiced by non-residents, mostly those from Russia, Belarus, Uzbekistan and other former republics of the Soviet Union.

It is added: “Latvia continues to complete the Maastricht criteria. Eurozone has never declined a single country that successfully completed all of these criteria”. However, any country of Eurozone can block the decision. As for France – following the visit of the Latvian PM, the government said it will support Latvia’s joining of the Eurozone.

Debtors will not be able to hide

Following Dombrovskis’ return to Latvia, the government gave the green light for the creation of licensed crediting bureaus in Latvia. These bureaus will be compiling information about all debts of individuals. An appropriate law is still to be settled by the Saeima: it is expected to come into force on December 2, 2013.

It is planned that crediting bureaus will be able to present data received from state services and private institutions .

In the end, the innovative solutions developed by the Economy Ministry are called to improve the general payment discipline in the country and make borrowed resources more accessible and cheaper.

Currently, given the low purchasing power of the population, the problem of debtors remains a thorn. Therefore, there is great need for operative assessments of credit risks.

These services are planned to be provided by the licensed crediting bureaus. According to the government, there will be a total of two or three bureaus.


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