Sunday, February 10, 2013

Anti-euro crusader gets stiffed, now what?

And so it has come to naught. That is how Saeima deputy Iveta Grigule’s efforts to stop the euro implementation law ended, at least as far as using the right of 34 Saeima deputies to petition President Andris Bērziņš to refuse to sign the law into force and put it to a referendum. The short of it is, she was stiffed last Monday by the Harmony Center (SC), the party that seemed to have pledged 31 signatures. SC leader Jānis Urbanovičs said it would be “irresponsible” to block a law that had been passed by a majority of the Saeima. Not even renegade National Alliance (N) parliamentarian Jānis Dombrava was ready to put pen to paper to block a law he had voted against in breach of coalition discipline.
Grigule, despite being left high and dry and looking more than somewhat foolish, soldiers on, sending a letter to the president with a handful of signatures (I heard three) anyway and promising to make every effort to get 30 000 voter signatures for a referendum initiative.
As I pointed out earlier, the ZZS parliamentarian’s appeal and that made by many other euro opponents is largely emotional. There is some merit, however, to the emotionally appealing slogan that “the people should decide”. Democracy is a good thing, especially if it looks like a democratic decision made nearly ten years ago (and implicitly) in voting to join the EU may have been hasty on the aspect of joining the eurozone. National electorates should have the right to revise earlier decisions, especially if they see things going in the wrong direction. This is what the British  government under David Cameron is suggesting.
So far fine and good, but if there is going to be a referendum on the euro (unlikely as that  may be), there should be a solid plan for the “no” side. The “yes” side has it all planned out in the contested law, down to every detail. Unless the euro opponents – so far a motley crew of cranks, crackpots and a few sincere and respectable critics, such as the economist/entrepreneur Jānis Ošlejs – come up with a detailed plan for how the lat will be managed after breaking away from its Exchange Rate Mechanism II (ERM II) corridor with the euro, they will be no viable “no” alternative. To leave things as they are means to keep the lat as “virtual” euro, which is one of the pro-euro arguments – why not get the real thing?
What worries me about the eurozone is that its troubles may not be over. The Greeks have not fallen over the side, but they would not be missed, even if there was a knock-on effect on other economies, followed by a rush from northern Europe  to sip ouzo, drink retsina and vacation on the Greek islands for new drachma that cost a pittance in post-Grexit euro. The serious shit, to use a term I am sure many economists use over a beer, will start to happen when Spain and perhaps even France (the Economist, hardly a crackpot rag has mentioned this) start hitting serious turbulence. That is when a lot of countries will need a well-thought out plan B, perhaps regrouping around a D-mark 2.0, probably called the Nordeuro or something like that.
Unlike the Scandinavian countries that stayed out of the Eurozone, Latvia does not have a strong economy and  a prosperous society, therefore the lat will have to be linked to some other currency or currencies, in, at best, some kind of managed float. Those responsible for the “independent” monetary policy that euro opponents say they are defending will have to design and manage it. So far, it doesn’t look like anyone in Latvia has done so.
P.S. Sorry for writing this so after the fact. My day job and some translation work has kept me busy.  


Juris Kaža said...

Here is a comment from "Anonymous" that I accidentally deleted and have now recovered. It was originally posted on February 12. Very sorry about this.
Most of the reasons for LV joining the eurozone are political, i.e. LV will be closer and more intertwined with Europe. Fair enough. Economically, it has been said that transactions will be cheaper and investors sitting on the sidelines will jump in to invest after LV moves to the euro. The first is true but I'm not sure about the 2nd. They are just waiting for the euro?? Really?! I have trouble believing that claim.
I think that there are several good reasons for not joining the eurozone at this time, notably that it is not a stable institution. The problems experienced by Greece, Spain, Portugal and Ireland are serious and have NOT been resolved. Also, the EU still practices discrimination, as evidenced by the recent agriculture subsidy decision. How on God's Green Earth is it fair and equitable that some countries receive higher support payments than others? Can you imagine the US Congress telling farmers in South Dakota that they will receive lower agricultural supports than farmers in North Dakota or Nebraska? That decision would be challenged and in front of the US Supreme Court faster than you can say, "rudzi, mieži, kvieši". The good people at the Bank of Latvia have stated that LV should tie its currency "boat" to the big ship "Eurozone". I'm hoping the actual name of the ship isn't Titanic or Concordia.
PS You mention that should a new monetary union arise from the ashes of the eurozone, LV should tie the lats to some other country's currency? Why? The arguments in favor of such an idea have been vague and not based on economics. So why do it?

Ian Mackay said...

Latvian politics are now making news in Scotland as BBC Scotland, the state broadcaster in Scotland, is accused of misrepresenting the comments of the Latvian European Minister Edgars Rinkevics by saying that Scotland would be out of the EU if Scotland becomes independent.
The BBC has form for this. They previously did exactly the same thing with the Irish European Minister Lucinda Creighton.
Even the Russia Today news channel have picked up on the bias.
There is now a campaign in Scotland for balanced broadcasting in the independence debate.
The BBC have said they do not have be impartial as the official independence campaign has not begun.
Not being impartial as a state broadcaster is serious enough, without misrepresenting the European Ministers of the European Union.