Latvian premier says joining euro in 2012 optimistic

Rising energy and food prices in Latvia and elsewhere in the world are forcing up inflation, Kalvitis said in a televised interview. “We can stand on our heads, but a local farmer won’t sell his produce cheaper than food costs in the world,” Kalvitis said. The government is not omnipotent, Kalvitis said. It can only use its own resources but it cannot influence the world economy.

Four months ago, the Kalvitis government announced a broad-based plan to curb inflation by gently reining in its own spending and encouraging the public to save more and spend less, especially in the overheated property market. The plan met with a mixed reaction, with some observers saying that it was neither timely nor ambitious enough. Annual inflation in Latvia jumped to 9.5% in July, the highest figure in the last 10 years, the Latvian Statistics Bureau announced last week. Latvia’s annual average inflation - a different measure from the rolling 12-month rate - was 6.5% in 2006. Experts anticipate the annual average inflation rate to reach 7.8 to 8% this year in Latvia.

The strict EU criteria for adopting the euro say that countries must have an average annual inflation rate no higher than the average of the three lowest rates in the EU, plus 1.5%. Latvia exceeds the requirements. Of the 12 new EU members, Slovenia joined eurozone in 2007, Cyprus and Malta will follow in 2008. Other countries plan to join the euro later. Latvia continues to be the fastest growing economy in the European Union. In the Q2, Latvia’s economy grew at an annual rate of 11.3%, the statistics office announced last week. However, inflation has been above 6% ever since Latvia joined the EU in 2004, leading to warnings of possible overheating. (monstersandcritics.com)