International Internet Magazine. Baltic States news & analytics
Thursday, 31.07.2014, 08:21
President: Latvia and Iceland cannot be compared
Berzins emphasized after a meeting with Prime Minister Valdis Dombrovskis (Unity) today that Iceland's situation cannot be compared to Latvia's due to both countries being different. For example, Iceland still enjoys free fishing, its energy matters are connected with hot springs and other specific aspects.
Iceland has always had a freely convertible currency and it is currently impossible to assess the impact of currency devaluation on Iceland, said the president.
Dombrovskis in turn pointed out that Darvas' commentary is yet another example of analysts mixing up causes and consequences. It is not the only commentary implying that the crisis started in Latvia due to the government deciding to implement sudden austerity measures. On the contrary, Latvia introduced austerity measures because the country's economy was heated up, explained the prime minister.
Currency devaluation does not solve budget deficit issues. These situations cannot be compared. Currency devaluation would do nothing for such a small and open economy as Latvia, said Dombrovskis.
As reported, although Latvia has overcome the financial crisis and is now the fastest-growing economy in the European Union, the price that the country has paid for its success story is very high, the Brussels-based think tank "Bruegel" analyst Zsolt Darvas says in an interview with LETA.
Commenting differences between Latvia and Iceland's strategies for existing the crisis, Darvas says he believes that Iceland's story is "more successful", and the social cost thereof - much lower.
Paradoxically, Iceland's was "lucky" to have no other choice but devalue its currency. Latvia did have a choice, and it chose to follow a different path, emphasizes Darvas.