Latvian PM blasts 'gerrymandering' of eurozone rules

Latvian Prime Minister Valdis Dombrovskis accused the European Central Bank of "gerrymandering" to hamper new entrants to the eurozone, while defending his country's credentials. Speaking to AFP in the Latvian capital Riga, a frustrated Dombrovskis insisted Latvia was "on track" to join the eurozone in 2014, as long as the rules were fairly applied. "Right now we have issues with some ECB ideas on how to apply the Maastricht criteria. It basically amounts to gerrymandering of the Maastricht criteria," Dombrovskis said. The criteria, tied to the 1992 Maastricht Treaty which created European economic and monetary union, relate to a country's levels of debt, deficit, inflation and interest-rate stability as a gauge of underlying economic sustainability. The rules have been breached repeatedly by many existing members of the 17-nation eurozone, but the economic crisis has brought tougher moves to police them. Latvia has a good chance of meeting all criteria by the end of this year, which would mean it could adopt the euro in 2014 -- provided the ECB doesn't block its bid. Latvia's currency, the lats, is already pegged to the euro. The government has brushed off criticism of its plans to join the embattled eurozone, saying it is better to be inside the bloc with Latvia's key trade partners. Dombrovskis charged that the ECB's method of measuring would-be eurozone entrants' inflation control was wrongheaded, with the bank using as a comparison the low rates of European Union members locked in International Monetary Fund-overseen austerity drives. But in contrast, those members' long-term interest rates were not used to create a measure, he said. "This is very strange logic," he underlined. "The end effect of this is that according to current ECB ideas on long-term interest rates, we would be measured against only one country: Sweden, which is not even in the eurozone and has extremely low interest rates," he explained. "We know what the Maastricht criteria are. We would like them applied evenly," he insisted. He said Latvia will raise the issue with the European Commission -- the executive body of the 27-nation EU -- which is to issue a key report on the country's eurozone readiness. Latvia, a former Soviet republic of two million, joined the EU in 2004 and earned a reputation for breakneck growth before skidding off the rails. At the end of 2008, Latvia struck a deal with the IMF and the EU on a 7.5-billion-euro ($9.9 billion) loan package. The loan programme, accompanied by a draconian austerity drive, concluded on December 22 with just 4.4 billion euros having been tapped. In 2009, the Latvian economy shrank by 18.0 percent compared with the previous year. That contraction was transformed into growth of five percent last year with Dombrovskis, who has just marked three years in power, gaining plaudits for getting the economy back on track. Latvia's finance ministry predicts growth of two percent this year.