Double-digit inflation is downside for Baltics in Euro club

New entrants to the eurozone are not regretting joining the fundraising group but are struggling with one of its challenges.

In the Baltic country of Estonia, inflation rose over a 12-year period of 12.2% in December. Nearby Lithuania is not doing well, with data this week showing inflation more than double the 5% increase.

He should not expect the monetary policy to benefit them anytime soon: The European Central Bank chief said on Tuesday that interest rates would increase “uncertainly” by 2022 as forecast indicates inflation would fall below the ECB’s 2% target. in the middle period.

This is in stark contrast to what is happening in non-eurozone countries, where central banks from Warsaw to Budapest are working aggressively to reduce inflation that has not been seen since communism.

If we had our monetary policy “we would be doing what Poland is doing and raising interest rates,” said Martins Abolins, an economist at Citadele Bank in Riga, the capital of Latvia, where consumer prices rose 7.9% last month.

Although mortgages have been “very low” in the Baltic region for many years without causing major economic downturns, the increase in household sales is alarming, “he said.

The concern is evident in Estonia, where the government is considering slowing inflation through budgets.

“If we have a single interest rate in the whole euro area, then the work of the national currency is to drive diversification,” Finance Minister Keit Pentus-Rosimannus told Bloomberg last month.

Lithuanian colleague Gintare Skaiste agrees, telling a news conference Wednesday that the issue of economic transformation has been on the agenda for the eurozone.

“Finding ideas that fit everyone is difficult,” Skaiste said. “Therefore, we must rely more heavily on international approaches that countries can adopt.”

Adding to the unrest, there is a sharp decline in labor in the region, with billions of euros in EU funding being expected to start soon.

Even so, the Baltic states are no doubt happy to have adopted the euro. In addition to economics and trade, the reforms helped to strengthen the Western culture of the 6 million people, just outside Moscow.

Being part of the euro zone has been “a huge boost,” according to Latvian Central Bank Governor Martins Kazaks, with whom his country has an alliance eight years ago.

“Look at a simple example of the crisis of 2008 and the crisis of 2020,” he said at an online event this week. “If at that time we did not have the opportunity to borrow and the economic transition was very painful, now it is a very different matter.”

Unlike places like Germany, there is little public outcry over current inflation, while many Baltic citizens have survived the rise in prices caused by the collapse of the Soviet Union.

In other words, the challenge they face here is simply to supplement what is happening in the major members of the eurozone, with regulatory powers.

Half a month ago an increase in Estonian prices came from energy, with electricity and natural gas costing more than 120% from a year earlier in December with high performance in cold northern temperatures.

But their problem could also ring off bells at the ECB, with the central bank in Tallinn speaking faster than lawmakers in Frankfurt about the dangers of second-hand consequences.

“Rising electricity prices mean that inflation is not going down anytime soon,” said Sulev Pert, an economist at Estonia’s largest bank. “It is bad for the economy if a temporary rise in inflation could cause companies to go up in price, causing them to change their prices and lead to higher wages.”

© 2022 Bloomberg

Original Article reposted fromSource link

Disclaimer: The website autopost contents from credible news sources and we are not the original creators. If we Have added some content that belongs to you or your organization by mistake, We are sorry for that. We apologize for that and assure you that this won’t be repeated in future. If you are the rightful owner of the content used in our Website, please mail us with your Name, Organization Name, Contact Details, Copyright infringing URL and Copyright Proof (URL or Legal Document) aT spacksdigital @

I assure you that, I will remove the infringing content Within 48 Hours.

Leave a Reply

Your email address will not be published. Required fields are marked *


Morning Headlines

BHP vax order confidentiality when miners are caught fraudulently Mining has introduced a new law banning BHP vaccines for reasons that violate workers’ privacy, after the company hired miners to obtain fraudulent evidence. The Fin Original Article reposted fromSource link Disclaimer: The website autopost contents from credible news sources and we are not the original […]

Read More

Alvotech Upsizes Oversubscribed PIPE Transaction to Approximately $175 Million

Breadcrumb Trail Links PMN Press Releases Business Wire News Releases Author of the article: Article content REYKJAVIK, Iceland — Alvotech Holdings S.A. (“Alvotech”), a leading global biopharmaceutical company focused solely on the development and manufacture of biosimilar medicines for patients worldwide, and Oaktree Acquisition Corp. II (“Oaktree II”) (NYSE: OACB), a publicly traded special purpose […]

Read More

BVG India plans to raise Rs 1,200-1,300 crore via initial public offering

Some of the findings will also help him get out of the 3i business company, which invested 200 crore in the company in 2011. BVG India’s integrated Pune arms company plans to raise Rs 1,200-1,300 crore through public offerings (IPOs), to move into new areas for improvement over the next two to three months, according […]

Read More