Analytics, Economics, Financial Services

Roberts Zile.

"We took the most painful path: to devalue income and retain a stable currency peg. The worst option would be to struggle like this for one and a half – two years, then yield in and be hit yet again. The community would then be lashed twice," the politicians underlines.

The International Monetary Fund analyzed the situation in the Baltic States and Hungary already long ago and gave warning signs to the previous governments, writes LETA.

Zile says he has never seen, neither in theory nor practice, events taking a similar turn of development as now in Latvia, where a tumbling economy would curb its state expenditure so much.

"We stick to a strict national currency peg, we deliberately increase the unemployment level and reduce residents' income; we can survive for a while like that. I underline: survive," Zile points out, saying that constant expenditure cuts is not a long-term solution. At the same time the politician admits that the loan provided by the international donors, whatever its implications, is almost the only source of financing available for Latvia that he is currently aware of.

Zile believes that it is necessary to convince Latvia's partners and the principal creditors that "we are still all in the same boat," therefore Latvia should be allowed to move on with an accelerated introduction of the euro or, if not, Latvia's currency peg should change, "I do not believe that we will successfully enter year 2014 with the same euro to lat peg as now," Zile said.

Commenting on the question, why of the two possible solutions, internal devaluation was chosen, Zile reminds that among the people who took this decision were ones who had taken out loans in euros. "I have seen information that the responsible persons who participated in adopting this decision were themselves dependant themselves on the outcome of this situation.

That would be pathetically sad, if we were only driven in this direction only or mainly because of such considerations, but I do hope it was not so," the politician underlines.