OREANDA-NEWS. On July 13, 2009 The Bank of Latvia informed that previously determined term for euro introduction - 2012 - 2013 is not realistic, denoting on Latvia’s incapability to reduce budget deficit until 3% during the definite time, and to fulfil one of the euro introduction criteria. According to the Bann of Latvia the 3% deficit is projected for as late as 2012, which means that the euro could be introduced in 2014 at the earliest, reported the press-centre of Latvijas Krajbanka.

It has to be noted that the budget deficit criterion is only one of the norms, non-fulfilment of which will not allow to introduce euro in the planned period. One of the Maastricht criteria says also that the long-term interest rates cannot exceed 2 percent points above the rate in the three EU countries with the lowest inflation. In May this indicator in Latvia comprised 11.09%, i.e. almost three times more than the corresponding Maastricht criterion.

There is no doubt that along with the worlds financial market recovery from crisis, stabilization on the lat market and recovery of Latvian economy, the long-term state bond rates in the market could become stable at the lowest levels, nevertheless there is no confidence that it will be enough to fulfil the euro implementation criterion. It is most likely that the rating agencies will not hurry to raise rating for Latvia, but it is important factor influencing interest rates of the state bonds.

We should also remember that during next years Latvia would have to repay the issued international funding with interest. Unfortunately meanwhile the structural reforms, which would push Latvian economy and allow the state to earn, not only to reduce expenses, were not made yet. So there is one question left, whether government will have to attract other resources to repay its loan. In this case there is no ground to hope for quick and substantial decline of interest rates of the state bonds. In this connection also the amount of total government causes concerns - according to euro introduction criteria it cannot exceed 60%.

Theoretically Latvia might have problems with three of five Maastricht criteria, the fulfilment of which is necessary to introduce euro. Thus, even 2014 seem to be the earliest, but hardly achievable term.

Unfortunately the uncertainty regarding the euro introduction term does not allow the local entrepreneurs to plan fully their activity for a long-term (which in fact is almost impossible now also due to many other political and economical factors). The worst is that for another time we are giving negative signal for Latvian current and potential investors about the situation in the state and in its economy, detaining recovery processes of Latvian economy.