Speech at 10-year euro conference in Riga
Labrit, Riga!
Prieks sanakt Melngalvju nama pec pieciem gadiem, lai šoreiz atzimetu jau eiro 10 jubileju Latvija.
Gandarijums redzet klatiene daudzus no ta laika komandas, ar kuru kopa stradajam pie eiro ieviešanas. Viens no tiem neapšaubami ir pašreizejais Valsts prezidents.
Mums bija doma nosaukt visus, kuri stradaja pie eiro ieviešanas, bet tas butu loti gari, taču velos pateikt paldies jums visiem!
Your Excellency President Rinkevičs, Excellencies, governors, ministers, ladies and gentlemen: a very warm welcome to this conference co-organised by the European Commission and Bank of Latvia.
For me, it is a pleasure to return to my home city for this momentous occasion.
Not only to celebrate 10 years of the euro in Latvia.
It also coincides with 20 years of Latvia's membership of the European Union, coming up this May.
Many of the people who worked to bring about both achievements are here today. All of us wanted to see Latvia take its place at the core of the European Union.
At the beginning of 2019, it was to this very venue that I came to talk about Latvia's five-year experience of the euro: the magnificent House of the Blackheads in the heart of Riga's Old Town.
For a quarter of a century, the euro has been making life easier for Europeans.
Today, it is the second most widely used currency in the world.
For such a young currency, it is an impressive feat in a relatively short space of time.
I remember very well in early 2002 when euro banknotes and coins appeared for the first time, in 11 EU countries with a combined population of 308 million.
It was the largest cash changeover in history.
Not yet in Latvia, of course. When Latvia was discussing the idea of joining the euro, we were just emerging from the global financial and economic crisis.
Back then, there were many sceptics. Some of them claimed that Latvia was buying the last ticket to the Titanic.
However, our determination to join the euro provided a solid policy anchor at a time of great economic stress for the country.
Latvia had entered the crisis as one of the most overheated economies in the world, with lax fiscal policy and unrestrained bank lending.
Preparing for euro entry also helped us to set out a major reform agenda which was badly needed.
On the economic side, since 2014 we have found the euro to be a stabilising force that also helped Latvia's competitiveness.
It has provided a significant incentive for economic development.
I don't want to overburden you with figures.
But they do tell their own story.
According to Eurostat, between 2013 and 2022, Latvia's GDP per capita rose by 10 percentage points to around 73% of the EU average.
Or take labour productivity, which has increased by 12 percentage points to 75% of the EU average.
Since the euro was introduced, a clear majority of Latvians believe that having the euro is a good thing for their country, and good for Europe as well.
Some benefits are very tangible.
Latvians can compare prices easily when they travel and shop abroad. They see the euro as making it easier to do business in other countries, removing currency risks and conversion costs.
More widely, Europe's common currency has improved countries' business environments and made them more attractive for investors. This is certainly the case in Latvia.
Why? because using the euro removes uncertainty about a country's future monetary policy. It strengthens external credit ratings.
It reduces public and private funding costs.
In turn, all this helps to promote foreign and domestic investment, leading to higher economic growth and more jobs.
Euro membership also brings a range of benefits that may be less obvious. For example, it subjects a country to specific EU laws in areas such as banking and fiscal policies.
Stronger fiscal policy coordination in the euro area helps to ensure sound fiscal policies and the formation of buffers to deal with future shocks. And it comes with a massive firewall – the European Stability Mechanism – that can provide financial support in case things go wrong.
This promotes financial stability and fiscal discipline in the countries concerned. It is good for the EU as a whole and boosts our collective competitiveness.
Ladies and gentlemen
For the Baltic States, and I hope that my Estonian and Lithuanian colleagues would agree, adopting the euro was a watershed moment.
It was not just about raising economic efficiency and promoting trade and investment. We also had a strong political motivation to be more closely integrated in the core of the European Union and the democratic world.
For Latvia, it sealed our full membership of the European family, tying us into its values, rights and freedoms.
Solidarity and partnership.
Human rights, justice and the rule of law – to name a few.
It gave us a True feeling of acceptance and belonging in Europe. I say that because, since its launch, the euro has become far more than a currency and means of exchange.
It is a symbol of Europe's strength, unity and solidarity: the cornerstones of enduring European peace.
That peace is now threatened by Russia's brutal aggression against Ukraine. In itself, it represents an attack on European values.
With the hindsight of history, it is clear that we were right to think as we did, after regaining independence to work towards joining the EU and NATO – as a matter of urgency.
Given the Baltic region's precarious location on Russia's borders, our shared recent history and familiarity with our large neighbour, we also saw the euro as part of a protective barrier – and vital for keeping our currency and economy stable.
I particularly remember the high level of support in Lithuania for euro adoption. It took place not so long after Russia's illegal annexation of Crimea in the first quarter of 2014. And this has helped to focus people's minds.
Today's tense geopolitical situation makes it more important to be properly anchored in the camp where we belong: in a free and democratic world.
It is also important as a way to preserve stability and to protect ourselves against risk or speculative attacks.
This is especially True for small open economies that are geopolitically more exposed, such as the Baltic States.
Belonging to the euro makes us feel a good deal safer.
It has helped us to survive a series of shocks and to stay strong in an increasingly volatile, hostile and fragmented world.
On the economic side, without the euro, the impact of the pandemic - and now Russia's full-scale war against Ukraine - would have hit us much harder.
Euro area membership brings greater credibility. In turn, that leads to lower borrowing costs and greater economic stability.
We can illustrate this by looking at interest rates.
Throughout the pandemic, three-month interest rates in the euro area remained relatively low compared with those of non-euro area countries such as Hungary and Poland.
But the difference between them widened significantly after February 2022, when Russia launched its military offensive against Ukraine. Interest rates in non-euro countries rose more sharply than in the euro area.
Over the past few years, interest rates have turned back from their previous extreme lows to address high inflation rates.
And the ECB's policy is proving successful.
Inflation is declining across the euro area - also in Latvia, where the shock has been particularly significant given the country's high exposure to soaring energy prices.
The coordination between monetary and fiscal policy has allowed us to lower inflation without creating a large economic downturn. In this context, the euro area economy has shown remarkable resilience, not least thanks to the good policy mix.
However, we cannot say this so clearly for some Member States outside the euro area.
Here, the economic risks are higher, and long-term interest rates are substantially above those within the euro area.
This has significant implications for companies regarding their investment decisions and future growth potential.
Ladies and gentlemen
When the euro was born in the aftermath of the Cold War, the world was a relatively calm and stable place.
Not so much now. Today's world is characterised by great power rivalry. Patterns of influence are shifting, between regions as well as continents.
Across the world, we see rising protectionism and unilateralism.
In such turbulent and changing times, the EU can achieve much more when its Member States act together and stay united to protect one another.
The euro is a key element that underpins European unity and strength.
We see this reflected in strong public support for the single currency: from Helsinki to Lisbon, from Athens to Dublin.
In the Eurobarometer survey carried out in October, nearly eight out of ten respondents in the euro area said they thought having the euro is a good thing for the EU.
Together, the 20 countries of the euro area command significant influence by pooling their economic strength.
This not only mitigates the risks faced by individual countries.
It also acts as a safety net and anchor of credibility and stability.
Since the euro is used extensively in global trade and financial markets, euro membership limits the risks of sudden capital outflows if a crisis strikes.
At times like these, banks operating in the euro area can draw on support from the European Central Bank. This means they can continue to lend to people and companies when it is needed.
We saw this happen during the pandemic, when times were especially tough.
So what of the euro's future?
The number of countries using the euro has now grown to 20, with Croatia the latest to introduce it at the start of 2023.
Bulgaria is likely to be the next country in line. It has been taking part in the Exchange Rate Mechanism II since July 2020.
It is working hard, both technically and politically, to meet the convergence criteria required to join the euro area.
Bulgaria has made significant progress. I hope that it will soon fulfil all the criteria so that it can become the 21st member of the euro area.
Having more countries keen to line up in preparation to adopt the euro is only a good thing. It confirms the euro's status as a successful, attractive and resilient global currency.
Also, expanding the euro area strengthens its wider role and influence. It promotes and boosts the euro's role on the international stage. This can help us to protect multilateralism and a rules-based economic order.
In a fast-changing and more fragmented world, a strong role for the euro reduces our dependence on the decisions of other countries. It allows us to better defend the EU's interests and values internationally.
Ladies and gentlemen
I already mentioned the difficult geopolitical landscape.
Against this backdrop, and much continuing uncertainty, it will be essential to maintain the EU's global competitiveness.
That means constant investment, in:
- innovation and technological leadership
- achieving the green and digital transitions
- and promoting our open strategic autonomy.
Primarily, this means investment from the private sector.
Let me start with the Banking Union: a flagship project for the euro area and essential part of a genuine Economic and Monetary Union.
We have been working hard to make sure that the EU's banking sector can continue to be a reliable and sustainable source of finance for the EU economy.
After many years of work and reform, EU banks are now strong and in good shape. The sector has built up its resilience substantially.
The EU system works well, with strong rules that allow both the EU and national authorities to handle bank crises effectively.
But we are not quite there yet.
Despite all the progress made, there is still a lot of work that we need to do. We are missing an important element of the Banking Union: the European Deposit Insurance Scheme.
So we need to keep working towards completing the project that we started all those years ago.
However, as part of the EU's broader investment plan, we also need to unlock alternative sources to bank finance and lending – especially given the scale of investments that we need.
This brings me to the Capital Markets Union.
Deepening and further integrating Europe's capital markets is the most cost-effective step we can take to drive investment.
Such markets give investors and firms more funding options, and better saving opportunities for households.
They unlock new sources of financing for companies, especially SMEs – making it easier for them to expand and thrive.
A fully developed CMU would also further support euro-denominated financial markets, and thus the euro itself.
For all these reasons - and more - completing the Banking Union and advancing with the Capital Markets Union remain a priority for the EU.
Doing so will help us build a conducive business climate that is attractive to investors.
And help us to build global confidence in the euro.
However, the euro also needs to keep up with the times – and with the digital age. While we can be proud of what has been achieved so far, there is a need to adapt and innovate.
As we move towards a True digital economy, a digital euro is a logical next step – given the declining use of cash in many parts of the world, including Europe.
The digital euro would complement cash - but not replace it.
And to be clear: the possible launch of a digital euro is a prerogative of the European Central Bank, which will have the final decision about if, and when, to introduce it.
I am sure that our next speaker Fabio Panetta will have more to say on this important subject.
To conclude:
Our common European currency started as a dream.
It was an idea that was first mentioned in the 1940s by some forward-looking politicians who understood that a united Europe would need a strong single currency.
Many years later, in the late 1980s, monetary union became a project to complement the closer economic integration that was developing in Europe.
This project - the euro project - finally became a reality on January 1, 1999, when 11 EU countries merged their national currencies. And the euro was born.
When I was Prime Minister, I had to oversee a major adjustment programme. Our country went through significant economic and social pain. But we came out stronger.
And one lesson was clear: we had to join the euro. This was one of my key priorities at the time.
I am proud that Latvia – Estonia and Lithuania as well – have become fully participating members of the ‘euro family'.
It serves the Baltic region well.
And we hope that we serve it well in return.
As I have outlined, the euro has many benefits for people as well as businesses across Europe.
It is a political and economic anchor, in peaceful as well as turbulent times. And it gives a real sense of European belonging.
Today, a quarter-century later, the euro is no longer a dream or a project. For most Europeans, it is a stable and essential part of our daily lives. Thank you.
| Zařazeno | pá 26.01.2024 09:01:00 |
|---|---|
| Zdroj | Evropská komise en |
| Originál | ec.europa.eu/commission/presscorner/api/documents?reference=SPEECH/24/442&language=en |
| lang | en |
| guid | /SPEECH/24/442/ |
