Does Latvia’s austerity success serve as a test case for EURO-style debt consolidation?

Latvia’s success with austerity politics is by now well documented and publicized. (see: CNBC’s interview with Latvian Prime Minister Valdis Dombrovskis ). And yet the question still needs to be asked whether that country’s experience with fiscal shrinking and consolidation (around 17% of GDP) can serve as a test-case for other embattled countries in Southern Europe. Former Czech President Vaclav Klaus doesn’t think so. In his address to the Cato Institute on March 11, he pointed out that the specifics of the Latvian case cannot be compared to those of Greece or Portugal, since Latvia’s national ambition to escape the overwhelming influence of neighboring Russia is so much different from that of Greece or others who already benefit from the protection that EURO membership does or does not grant.

And in fact, Noah denkt™ cannot deny that Mr. Klaus’s argument is valid here. At the same time though, the Latvian case proves that the success of austerity depends on political determination, national consensus and common interest rather than on some obscure law of economic nature as some commentators would have us believe. In other words, the question that Latvia poses to the societies of Greece, Portugal and Italy is this: Do you still want to be part of the EURO and accept the ensuing responsibilities or do you not want to be part of this multilateral project? After all, that is what it really comes down to. And if it so happens that the national consensus in subject countries is against embracing the sacrifice of a common European currency then, in the name of God, they should stop complaining about others and leave instead.

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