Introduction of the euro would automatically improve the sovereign rating of Latvia, put the country in a different light in the eyes of foreign investors and lure additional investments to Latvia, Martins Bitans, deputy director of the Bank of Latvia's monetary policy department, said at a finance conference on Friday.
He said that one-third of the residents of Latvia are for the adoption of the euro, one-third are against, and the final one-third haven't made up their mind. Right now a heated discussion is going on over whether the decision about the changeover and its timing were grounded.
"All of a sudden it seems that our money is the most beautiful in the world. The question arises why should we change a system that works and step into the unknown," Bitans said at the conference in the Estonian town of Parnu, describing the opinions circulated in Latvian media.
He said that changeover to the euro is of crucial importance for catching up with the successful countries. "I know that Estonians like to compare themselves with Finns. Latvians like putting themselves side by side with other countries too. If five or six years ago we looked to the Germans then today our initial goal is to catch up with Estonians. For that we need to do the same that has been done in Estonia, and that includes the switch to the euro," said Bitans.
The timing of the adoption of the euro is causing questions in Latvia now given the negative news coming from the eurozone, he said. "We've seen the economies of different countries collapse one after another. Against that backdrop it's been asked a lot – why hurry, why should Latvians be the last to catch the sinking ship. Let us leave that role to the Estonians," Bitans said.
The Bank of Latvia official said that he, however, believes that the eurozone has become stronger in the crisis and has improved its policies, adjusting its monetary and fiscal policy and the banking system, for instance.
Bitans expressed hope that growth of the eurozone economy will be restored. Adoption of the euro is not solely a technical procedure where one paper note is replaced with another. "To improve Latvia's competitiveness both are necessary – adoption of the euro and a shift in the present policies," he said.
It would be very difficult for Latvia to achieve its long-term goals staying out of the euro area, he added. "If we want to be like Estonians, adoption of the euro coupled with sensible policies will be the best," Bitans said.
Latvia intends to switch to the euro at the start of 2014.