
Latvia becomes 18th state to join the eurozone - lelf
http://www.bbc.co.uk/news/world-europe-25567096
======
atmosx
As I Greek, having the experience of the Euro both theoretically and
practically, I can say that the currency per se, it's not _a problem_ but
given the way the ECB acts the last 3 years, I don't understand why would
anyone give-away the control of the countries currency to a board of people
who act in very controversial ways..

~~~
justin66
Do today's Greeks blame the bulk of their economic problems on outside forces,
rather than things they've done to themselves?

edit: I don't really have an agenda with this question - I'm not a European
and I'm not invested in any way, really - and I'm a little surprised at how
quickly it got voted up. Please just treat it as a sincere question.

~~~
cynicalkane
In economics, everyone is always looking to blame everyone else. But the fact
remains that, once the initial recessionary shock is over, whether or not an
economy recovers depends almost entirely on whether the central bank follows
mainstream economic principles, or the pseudo-principles that are popular
among politicians and pundits. Israel and Australia are known for executing
the former. The Fed split the difference. The ECB has taken overwhelmingly the
latter course, and Europe is paying for its love of convenient, self-
flattering economic narratives.

The policies and the policy effects of central banks are measurable in
elementary ways. This is not an opinion. It's very important to realize the
role of the ECB and the Euro in this recession, because the current popular
alternative--mindless national hatred--has not turned out very well for
Europe, historically speaking.

~~~
nhaehnle
I largely agree with what you write, but I'm somewhat skeptical about blaming
the ECB. The thing is, it seems that monetary policy is actually pretty
powerless when your goal is to _increase_ economic activity (rather than
slowing it down).

Point in fact, what could the ECB have done better? They could have reduced
interest rates faster and more aggressively, but would that really have
changed so much? What else could they have done?

I think the blame lies squarely on fiscal policy, namely the European
obsession with austerity. Mainstream (that is, non-pundit) macro-economics
correctly predicted that austerity would hurt, yet European politicians
_still_ follow that prescription.

In part, the _structure_ of the Eurozone is at fault. If the automatic
stabilizers like unemployment insurance and other social programs had been a
part of a supranational budget, the crisis would never have become as deep.

~~~
jaggederest
The problem is their messaging. If they stood up and said to politicians "You
must spend money to pull your economies out of the slump", it would have been
much better.

Also, even if it wouldn't have been that effective, more aggressive interest
rate moves _would_ have done _something_ , and that _something_ on the margin
means less suffering in the world.

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mindjiver
National security will always be the number 1 priority with the kind of
neighbour Latvia has.

~~~
mpg33
Which neighbor?

~~~
gaius
First Latvia was occupied by the Soviet Empire, and all that entails, the
purges, the gulags and so on. Then it was occupied by the Nazis, and all that
entails, death camps and so on. They were especially keen on punishing anyone
they thought might have found a way to co-exist with the previous invaders.
Then after that, the Soviets again, keen to punish Latvia for "surrendering"
to the unstoppable Nazi war machine. The Soviets were keen on _lebensraum_
too, and set about deporting Latvians on an industrial scale, and colonizing
the country with Russians.

They are still finding pockets of exiled Latvians deep inside the Russian
interior, and asking them if they want to come home.

~~~
atmosx
The Eurozone (Germany mostly) is getting closer and closer to Russia. I don't
think Latvia will gain any advantage from this.

Take a look at what happened to Cyprus. They (the EU) would never do that to
Italy, no matter how crisis-striken would ever be. Meaning: Say tomorrow
Russia invades Latvia, the EU will do a couple statements and that's about it.

~~~
DasIch
How an attack on a EU member state will be reacted to will set precedent. The
EU cannot afford not to react to such an attack with full military force no
matter which member state is attacked.

Apart from that the majority of states in the NATO are also EU member states,
meaning that the EU has effectively control over the NATO. Also something that
might be worth considering in such a scenario.

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jevinskie
What does this entail? Open borders to EU residents? Just the Euro? Or also
free trade within the EU?

~~~
thebear
In addtion to the things that other commenters have mentioned, there is one
more difference between having your currency pegged to the Euro and being a
Euro country: when goods are traded between two Euro countries, these goods
aren't really paid for. Instead, the sale is transacted through the so-called
TARGET2 system. Wikipedia describes it like this:

 _A Dutch importer, for example, might place an order with a Spanish company.
Payments to and from the accounts of the buyer and seller are channeled via
central banks, so the Spanish exporter 's bank gets a credit with the Banco de
España, which in turn has a claim on the ECB. The Dutch importer's bank owes
its local central bank, leaving De Nederlandsche Bank with a debit at the
ECB._

The idea behind this was that the liabilities within the TARGET2 system would
cancel each other out. To everybody's utmost surprise, however, this has not
happened. For example, Germany is currently being owed over 650 billion Euros.
Needless to say, the countries who owe this money don't have it anymore.

~~~
nhaehnle
> _when goods are traded between two Euro countries, these goods aren 't
> really paid for_

This is a very politically biased and misleading perspective on reality.

Consider an alternative world in which the central banks of the Eurozone would
have been consolidated entirely. That is, no more Bundesbank, no more De
Nederlandsche Bank, only the ECB. All commercial banks would have central bank
accounts directly there.

In this world, _everything_ in the real economy would look _exactly the same_
as it does in our world.

However, this alternative world would not have Target balances in its central
bank system, and therefore nobody (including you) would ever even think to
write that "goods aren't really paid for".

But how can it be that goods are paid for in this alternative world while they
aren't paid for in our world? The answer is that that just doesn't make sense.

Goods are paid for even in our, non-hypothetical world. Yes, there are flow
imbalances, but guess what: That happens in every region ever that has a
unified currency.

If you don't like that, then please just be honest and come right out and say
so. Don't try to cloud your opinion in misleading rhetoric.

------
duhast
I hope that Poland will follow the same way.

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X4
They are fu __ed.. I feel sorry for them as a European. Our politicians will
rip their economy away. This pact they signed essentially sold their country
including their people. It 's always the same, the strong countries look for
weak countries to join their forces by promising money. When the small
countries need the money the most, they will get promises and packages coming
with many hooks. Hooks that will cripple and kill the economy of the country,
such that at the end the strong countries can suck up all that is there. Their
money, their land, their resources, their best engineers and workforces. And
what's left at the end is not a country, but a lost fight. A fight that was
never fought and silently won. Both governments win and assure their own
security in trades and assets, but the people loose.

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falsedan
Latvia planned to join the Eurozone in 2008, but, well, y'know what happened.

------
elnate
"Latvia becomes 18th state to throw away control of their economy."

~~~
antr
economy != control over monetary policy ; but sensationalist media has done a
great job at making citizens believe otherwise

~~~
fiatmoney
Not only monetary policy, but to a large extent their banking system, and
their fiscal policy as well.

~~~
pilsetnieks
Knowing Latvian politicians and bankers, that can only be a good thing.

------
veganarchocap
R.I.P Latvia.

------
seivan
Yay, another third world country to join EMU.

Yes; Spain, Portugal, Italy, Greece & etc are third world countries. These
days I even want to add France to it...

~~~
fiatmoney
Their per-capita GDP is ~20k in PPP terms, which is hardly third world.

~~~
seivan
Yes, yes it is.
[http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_...](http://en.wikipedia.org/wiki/List_of_countries_by_GDP_\(PPP\)_per_capita)

It's right there with Italy, Greece and etc. All third world countries.

~~~
romanovcode
If you think that Italy and Greece is third world you don't know what you're
talking about.

