Surprised? I´m not

latviaSurprised that Latvia is seriously thinking of joining the euro?
Don´t be.
It makes perfect sense.

Being inside the eurozone, in itself, doesn´t seem to hurt your economy one bit. Look at Germany, Finland and the Netherlands.
Obviously, there is a risk that your country will have to put up money for the rescue of debt laden euro partners.
But then again – that doesn´t seem to be too painful. The eurozone central banks came away with a profit of 14 Bn EUR in 2012, in interest from the bonds that the ECB bought to support five debt ridden euro countries (Portugal, Italy, Ireland, Greece and Spain).

And also there´s the fact that being outside of the eurozone doesn´t appear to protect you against recession or bad times. Look at the United Kingdom, Iceland, and… yes, look at Latvia, a few years ago.

Remember? Latvia crashed savagely in the beginning of the international financial turbulence, in 2008 and 2009. Latvia’s GDP fell by 17.7 percent in 2009, the sharpest economic contraction in the EU.
It is a familiar story, about banks lending generously to anyone who came even near a bank, building up a bubble, overheating the economy. In this particular case, it happened to have been Swedish banks, since they dominated the Latvian banking market.
At one point, Swedish banks had 50 Bn EUR of loans outstanding to the 2 Million inhabitants of  Latvia.
Had to crash, right?

When it did, the Swedish banks belatedly froze all credit giving. The EU and the IMF came to the country´s rescue but Latvia had to pay a high price. Public sector salaries were cut by 40%, pensions were slashed, hospitals closed and unemployment went up to 24 % (youth unemployment 43 %). The young fled in droves. During the last decade, 13% of the Latvian population has emigrated.

Being a non euro country, Latvia, unlike Greece, was of course free to go for the less painful option, to devaluate the currency, thus slashing the debt radically.
That would have really hurt the Swedish banks.

Well, it turned out right for the banks (Swedish finance minister Anders Borg doing some intense lobbying just to make sure). Latvia chose austerity, repaid its loans and the four big Swedish banks have since 2008 clocked a handsome profit of 20 Bn EUR.

Now, if Latvia joins the euro, it will be part of the European Banking Union so supervision of the banking market will fall under the ultimate responsibility of the ECB.
Or they could take their chances outside the eurozone. The Swedish banks are back in Latvia big time, happy to do business, controlling half the market already.

Sweden of course, has no intention so far of joining the European Banking Union seen as the Swedish national surveillance of banks is excellent, according to the Swedish finance minister Borg.

Personally, I´m not surprised that the Latvian government wants to join the euro.

  1. #1 by Marc on March 4, 2013 - 9:05 pm

    I’m not surprised either. Today’s pro-EU politicians are almost unanimously anti-ordinary-people.

    Here in the Netherlands, or our neighbours from Belgium or Germany, we could tell you the Euro is an unmitigated disaster. Prices disproportionately increased, wages were kept down.

    But above all, only the top 15-20% of the population is better off. The rest either saw relative or absolute declines in income.

    This example of Latvia’s government putting Swedish banks ahead of its own people only underlines it.

    And just wait until the ECB has to start writing off on all that worthless collateral with which it is loaded. You’d wish you weren’t part of the Eurozone when that happens (when, not if).

    • #2 by Hilda on March 4, 2013 - 11:15 pm

      Euro is good if country is indenpendent. It gives protection against BIS attax. For Example. Islands Guernsey, Jersey and Isle of Man have 2 currencies in use. Fascist’s Germany kept Mark, but they actually used as currency notes something like food stamps. There is indenpendent currency WIR in Switzerland since 1934. WIR is used in barter trade equivalent of 1bilion Swiss Frank. Similar trik is using Ecuador. Unoficially oficial currency in Ecuador is US dollar. Official currency is de facto abandoned but is there. BIS knows it so they even do not attack oficial Ecuadorean currency. Wasting time. On other side they attack Bolivian, Venezuelan, Argentinian etc currencies.
      Simply. Use Euro Yes, keep local currency Yes. As soon as country adopt Euro only then is in trap.

    • #3 by Derek on March 6, 2013 - 2:03 pm

      Well said Marc. Agree 100%. Political elites across europe are trashing the prospects of those they are supposed to represent. I only hope this all ends peacefully.

  2. #4 by Marc on March 4, 2013 - 9:06 pm

    And don’t forget, the IMF like the World Bank is a criminal organization. Conspiracy to enrich western corporations at the expense of ordinary people in Europe (they seem to have robbed Africa blind already).

  3. #5 by Hilda on March 4, 2013 - 11:05 pm

    The European Union released figures for Q4 2012 GDP today and they were awful. GDP fell by 0.6% in the euro zone and 0.5% in the entire EU, with only Estonia and Slovakia growing inside the euro zone in Q4. Looking at the overall figures, the 0.6% contraction in the fourth quarter in the euro zone is the worst economic contraction in Europe since the beginning of 2009.

    The German newspaper Die Welt reported that the President of the European Commission, Josй Barroso had spent a week on the yacht of Spiro Latsis. It emerged soon afterwards that this had occurred only a month before the Commission approved 10.3 million euro of Greek state aid for Latsis’ shipping company.

    Noam Chomsky called “Economics in the real world.” this book: Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism.”

    This is exactly what is EU about. For example. You will learn how Britain for 400 years protected their economy by import duties etc up to 50%. And then when they achieved goal to destroy competition they started with neo-liberal agenda. Bad samaritans will not help you as biblical ones, but they will destroy country by country by Unholy Trinity

  4. #6 by jon livesey on March 5, 2013 - 9:01 pm

    Argument by “I am not surprised” is more impressive if you show some signs of understanding the issue you are talking about.

    That euro membership has not hurt Germany is easy to explain. Germany has traditionally operated with low wage/price inflation expectations, so it usually has very flat nominal wage settlements and maintains a high degree of unit labour cost competitiveness.

    On the other hand, Italy, Spain and France have had high wage/price inflation expectations, and high nominal wage settlements, and have gradually lost unit labour cost competitiveness against Germany. Worse, their attempts to regain competitiveness have resulted in driving up unemployment and shrinking their GDPs.

    This is something that has been widely discussed for the past five years at least, so framing the question as if it is about membership of the euro or non-membership is a really ignorant way to start.

    It’s not about membership or non-membership at all. We know this. It’s not even controversial. It’s abotu maintaining unit labour cost competitiveness versus the core if you *are* a member.

    Oh, and by the way the UK grew by 0.2% last year and the euro-area shrank b y 0.9%, an advantage of more than 1% in favour of the UK. UK unemployment is currently 7.5% and euro-area unemployment has been over 10% for a decade and is not standing at 11.9%, an advantage of nearly four percentage points in favour of the UK.

    If the argument in the Latvian Cabinet boiled down to “It hasn’t hurt Germany” then all I can say is: God help Latvia. However, I would think that the Latvian Cabinet actually understand the issue better than this author does.

    I don’t mean to be rude, but this author shows no signs either of knowing the up-to-date facts, nor of understanding the economics behind the euro.

  5. #7 by jon livesey on March 5, 2013 - 10:55 pm

    It’s probably pointless to correct anything Chomsky says, but the last time UK tariffs were at the 50% level was at the beginning of the 19th Century in the middle of the Napoleonic Wars.

    They then declined sharply throughout the 19th Century and by the first decade of the 20th Century they were in the 7-8% range.

  6. #8 by mustafa copur on March 23, 2013 - 8:39 am

    l would like to inform you that.europa if they continion to feed.akp turkish anemy of jesus and humanity they will suffer forever.turkish premier which he say sionist isreal but hes one of the ottoman muslim which he use clopatra beach and ledies beach in turkey for sexual sick for norwagian and swedish rude which they will go to turkey use the beach.following sionist akp turkish primier even he will sell turkey for islam rude poeople,as a europa they suffer kominist mind to integreta to europa it took 20 years now l will suffer for integration sionist akp turkish anemy jesus.l was suffer integration to kominist mafia to europa. now norway working with terorist to send me beck to turkey.but this sexual sick which their holiday in turkey .there is no any low given this sionist turkish and pimp norwagian they kill my life in turkey.16 years half of 16 years prison in eu countries for nothing following use same of bitch spy kurdish in hvalsmoen asylum center to sent me beck to my anemy.l would like say there is anything withouth justice.if l will not meka justice my jesus will meka justice. norway if you thinging any dicision do not worry l will not give you right to meka happy your extremism in your infrant of and bihand .norway and this pimp swedish they will be respond oll persecuting.even if norway sell their king family hes wife to alkaide terorist if they use kurdish bitch spy to she given her body for meka norwagian spy will not help darknes.nobel prise giver anemy of jesus and anemy of is not norway swedish they give their infrant of bihand to asylum seaker this not love. love is human rights.kurdish leader abdullah ocalan he say we living 2000 years under the islam flage with turks yes besauce of this killing one million half ermenian yes besauce of this oll asurian they run in city mardin yes besauce of this you thiscrimination me.l love my land as a kurdistand but with turkish steta or akp erdogan even l dont spit their parlemento.and low.
    today l ask to stop extremism rasism pimp job easy job use person to got better life.
    in the nema of jesus l inform you.
    born city.sivas
    born deta.06.20.1969
    riligion jesus sperate me from your sionist akp islam mind from turkey forever.amen
    adres.hvalsmoen transittmottak