On Saturday, May 12, in Tallinn (the capital city of Estonia), during the panel discussion of the Lennart Meri Conference devoted to the future of the Eurozone, Prime Minister Valdis Dombrovskis emphasized that in order to successfully overcome the crisis in some Eurozone countries, they need a clear crisis exit strategy.
“Any country may refuse the budget consolidation. However, before that it is necessary to answer the question - who will finance the budget deficit? If there is no answer to this question, then consolidation is the only alternative,” said V.Dombrovskis, speaking about the situation in Greece.
Informing about Latvia’s experience of overcoming the crisis, the Prime Minister stressed that in March 2009, nobody knew what will happen with the Latvian economy in the coming weeks. “In similar situations, one has to set up clear objectives and set a system of milestones to get out of crisis. In our situation the exit strategy was for Latvia to join the Eurozone by 2014, for which the two main objectives were set – maintaining the exchange rate and reduction of the budget deficit. Looking at what happens in Southern European euro member countries there is feeling that no clear exit strategy has been set”.
“In case of Latvia, the international lenders’ position was unambiguous – if the set objectives and requirements are not met, no financial assistance will be provided. In case of Greece, the EC has repeatedly provided financial assistance, despite the systematic non-compliance on the Greek side. Perhaps this difference in approach is due to the fact that Greece is the Eurozone country, but Latvia is still outside, however, I am convinced that the ‘moment of truth’ when it will be necessary to decide on a clear action is approaching also Greece,” said V.Dombrovskis.
“Contrary to the currency devaluation that was so much emphasized as the best means of improving competitiveness, the crisis experience shows the opposite – the best results are reported by those countries, which have maintained the exchange rate and made great structural reforms – Latvia and other Baltic countries are the best example,” said the Head of the Government of Latvia.
“Finally, responding to the question about the future of the euro area, I would like to argue that my country would not join the club which is out of order. We are ready to join the Eurozone as soon as in 2014 as all the parameters are in green and we believe in capability of the countries to stabilize the situation prior to arrival of new members”.
The panel discussion was also attended by Olli Rehn, European Commissioner for Economic and Monetary Affairs, Patrick Honohan, President of the Central Bank of Ireland and Alexander Stubb, Minister for European Affairs of Finland, while the discussion was chaired by Quentin Peel, correspondent of the Financial Times in Berlin.
The photos of the Prime Minister’s participation in the Lennart Meri Conference:
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