Analytics, Crisis, Economics, EU – Baltic States, Financial Services, Forum, Latvia

Zatlers said that, first of all, Latvia was grateful to the European Union and several individual EU member states that had showed solidarity with Latvia. 80% of funds meant to rescue the financial system of Latvia were provided by Latvia's partners in the EU. The speed and decisiveness showed during this process were very important to Latvia, said Zatlers.

Second – and the main reason – why Latvia was able to recover was the complicated fiscal reorganization that had begun back in 2008. Fiscal consolidation in Latvia been dealing with changing tax rates and public expenditures system, which is not an easy task. However, Latvia's goal is to reduce budget deficit from a two-digit figure to five% of gross domestic product by 2012, so Latvia could adopt the euro on January 1, 2014. Joining the euro area is an integral part of the recovery process in Latvia, which is why Latvia is also interested in stability of the eurozone, Zatlers said.

Third, Zatlers said he believed that Latvia's approach to the economic crisis had been right. Austerity first, encouraging economic growth afterwards. This way, a small and open economy such as Latvia's is able to withstand economic downturn. Structural changes were also necessary in Latvia to make the national economy more competitive, noted the president.

Finally, Zatlers believes that there are other countries that will need to go through significant budget consolidation process in the near future. The past two years in Latvia showed that fiscal consolidation and recovery is possible, but only with public support. Constant and honest communication with the community is the most important in attaining such support, stressed Zatlers.

Zatlers also said that Latvia was one of the countries that was hit very hard by the global economic crisis. However, positive trends have been observed in Latvia's macroeconomic indexes from the beginning of this year. Latvia's GDP has been growing on a quarterly basis, the growth in export is in double digits, and there is current account surplus at the moment. Zatlers considers this to be a turnaround, even though complicated fiscal decisions are yet to be made next year regarding the state budget, writes LETA.

Zatlers also reminded that cautiousness would be highly important to prevent new economic crises in the future, yet even more important would be financial and economic stability. Latvia is pleased at the EU and G20's suggestions regarding global financial and economic governance, said Zatlers.

As reported, Zatlers is attending the Asia Europe Meeting in Belgium.