January 2014        

Latvia joins the euro

Latvia became the eighteenth country to join the euro zone when it adopted the federal currency on 1 January. The prime minister, Valdis Dombrovskis, said: “Joining the currency is a big opportunity for Latvia’s economic development.” However, adopting the euro also goes against the wishes of the Latvian people. Opinion polls found that only a fifth Latvians supported the move, while 60 per cent are opposed. More than four-fifths of Latvians believe the euro will lead to higher prices, according to a separate study by the European Commission.
      The Latvian people wanted to keep their own currency, but the Latvian political elite are committed to the European federal project. The Latvian people have endured much hardship and austerity for the country to meet the criteria for joining the euro zone. During the recent economic crisis the government followed the wishes of the European Central Bank by refusing to devalue the Latvian currency, the lat, and instead engaged in “internal devaluation,” which saw massive wage cuts for Latvian workers and cuts in welfare payments.
      Since declaring independence in 1991 the Latvian elite have been dedicated to right-wing and neo-liberal policies, which saw the country join NATO and the European Union. A speculative bubble led to an economic crisis in 2008–2010. A massive contraction in GDP led to high levels of unemployment.
      This period also saw a demographic crisis as large numbers of young people migrated to western Europe. The population of Latvia has been in continuous decline since independence, but the problem has been exacerbated by the recent economic crisis.
      Signing up to the European Central Bank’s monetarism has made Latvia’s economic woes worse. The euro is run by unaccountable bankers in Frankfurt, who care nothing about the effects upon ordinary people of unemployment and cut-backs. The sole agenda of the ECB is to keep inflation low so that there will be “investor confidence.” The currency is run entirely in the interests of rich elites, while the ordinary people of Europe continue to suffer through unemployment, pay cuts, and reductions in public services.
[BG]

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