Despite Europe's Financial Crisis, Latvia To Adopt Euro
DAVID GREENE, HOST:
For the past five years, the words eurozone and crisis have been almost inseparable, which makes you wonder what Latvia's thinking. The former Soviet Republic actively pushed to get into the eurozone. They were approved this week, and will begin using the currency in January. We called Pauls Raudseps, economics commentator for the Latvian news magazine IR, to ask him: With all of the eurozone's problems, why does Latvia want in?
PAULS RAUDSEPS: Maybe it looks odd to the outside, but we see it as a source of stability for the country. We're a small country with a relatively small economy and a currency that, over the last 10 years, was just buffeted by panics and mistrust. And if we join the eurozone, we get out of this risky zone of having our own small currency and join a larger currency zone where, OK, there's some risks there, but still, we see this as a much smaller risk than staying outside.
GREENE: It sounds like there's not a whole lot of support in the country. I mean, there have been some opinion polls showing less than 50 percent of people in Latvia approving of this. What are the downsides, in the view of some people?
RAUDSEPS: The basic thing is that there's a huge sentimental and patriotic attachment to the currency we have right now. It was really a symbol of the renewal of Latvian independence back in 1992, when the currency was introduced. People see it as a success story, because we've managed to maintain the value of the currency over all these years. But nevertheless, it creates a lot of questions in the minds of investors and in the business community here.
So from the economics planning point of view, it's, in my opinion, a wise choice to turn to euro, but people, you know, they're loathe to let go.
GREENE: And this is the currency, the lat, we should say.
GREENE: And so you're saying that there's really a sense of pride. I mean, Latvian independence restored after the Soviet Union, and this is something that people feel a real emotional attachment to.
RAUDSEPS: They really do. And the opinion surveys show that. You know, when people are asked if the currency is an important part of national identity, something like two-thirds say that it is. At the same time, when you look at how they act economically, most big purchases are already done in euros. Eighty percent of all mortgages and big loans are in euros. Whenever there's sort of economic fear running through the country, people go and change their lats into euros.
So on the everyday economic level, people actually are already very euro-ized.
GREENE: But some of the eurozone countries - I mean, we think about Greece and Spain - some major problems. And because of, you know, the other countries were in that community with them, those problems dragged other members of the eurozone down. Aren't there worries that Latvia might be part of that in the future?
RAUDSEPS: Well, there's two parts to that question. First of all, I mean, what Latvia went through outside the eurozone is very similar to what Spain or Ireland are going through now. You know, you can get into these kind of problems whether you're inside the currency zone or outside of the currency zone. And Latvia has been successful in getting out of these problems.
We've had the fastest growing economy in the EU for the last two years now. That's one thing. And the second thing is, OK, yeah. It's true. There are problems with these countries, and there are certain risks for the eurozone as a whole. There may be additional bailouts down the road. I mean, this is something people are aware of.
So you have all those very immediate risks, as opposed to some risks that may take place down the road, but on the other hand, they may not. I mean, we've seen, over the last year, the commitment of the European Central Bank and the big European countries to maintaining the euro, to keeping this budget going, has been very strong.
So I think that, you know, if you balance these risks out, it's probably safer to join than to stay outside.
GREENE: All right. We've been talking to Pauls Raudseps. He's economics commentator for the Latvian news magazine IR, discussing his country moving into the eurozone at the beginning of next year. Pauls, thanks a lot.
RAUDSEPS: Thanks for having me.