Latvia’s PM says European Union’s fiscal treaty will prevent a new debt crisis

The ratification of the European Union’s fiscal discipline treaty is highly important for Latvia, since it will prevent new debt crises, Latvia’s Prime Minister Valdis Dombrovskis emphasised on February 27.

Dombrovskis pointed out that the treaty aims at solving the eurozone’s current issues and ensuring a stable basis for its further development. It will also prevent similar crises in the future. “Latvia also wants to ensure economic growth and prosperity, with the help of eurozone advantages. We are interested in a stable and strong eurozone,” the Latvian PM explained.

Several analysts believe that fiscal discipline and economic growth exclude each other and that austerity measures will not lead to growth. Therefore, governments are being urged to increase their budget deficits to stimulate economic growth, Dombrovskis noted.

“I cannot agree with such statements. Stability is a precondition for growth. It is ensured by financial markets’ trust, which in turn is gained by prudent economic actions. According to such claims, Greece, who does not observe fiscal discipline and has a large budget deficit, should be flourishing, whilst Estonia with its smallest budget deficit and national debt should be consumed by depression.”

“In reality, however, Greece is sinking deeper, whilst Estonia registered the steepest growth in 2011, 8 percent of gross domestic product,” Dombrovskis underlined.