One of this days Latvia gets the first accept of meeting the Maastricht criteria o join the Eurozone by 1 January 2014. In an expert article in Baltic Rim Economies May issue, Morten Hansen from the Stockholm School of Economics in Riga, Latvia finds that joining the euro it will reach its “monetary policy destiny”.
“The country has also already demonstrated that it can operate well inside the
‘friendly straitjacket’ of a fixed exchange rate system, just witness the remarkable (but brutal) labour market flexibility following the financial crisis. And what is the alternative
anyway?” ask Morten Hansen retorically.
Moten Hansen uses the boom-period in Latvias economic history - where labour market was overheated, runaway labour costs created high inflation and a sharp deterioration of external competitiveness - to warn about loosing competitivenss that way in the future.
“Latvia has seen notable migration which may rather easily lead to bottlenecks in parts of the labour market and thus increases in labour costs that may harm competitiveness. A more active labour market policy is warranted together with a vigilant eye on competitiveness.
The arguments for joining the Eurozone outweigh the rather few arguments for not joining, however. Latvia should indeed be on its way to its monetary policy destiny, if I may conclude in this rather pompous way,” Morthen Hansen ends
Source: Baltic Rim Econimies - Issue Nr. 3 - 23 May 2013 -page 61
http://www.utu.fi/fi/yksikot/tse/yksikot/PEI/BRE/Documents/2013/BRE%203-2013%20web%20final.pdf