The governor of the Bank of Latvia (TBL) Ilmārs Rimševics does not have an easy schedule these days. His explanations about the actions of TBL are convincing. However, his comment on speculators caught with their fingers burned in 1995, 1998 and the consequent prediction that they would get burned also in 2007 sounds a bit bold to me.
If we compare not just the relative " soundness" of the Latvian macroeconomic situation in the middle 1990´s with the current account disbalance, inflation expectation embedded in folks minds and snowballing consumer credit boom today, then situation does not seem delightful. In addition, in the middle 1990´s Latvian government was still aspirant country to the Western club organizations, thus it followed stringent requirements of the Washigton consensus. As the bank governor rightly noted Latvian monetary authority is transferred to the European Central Bank (ECB) in Frankfurt, but why not to reintroduce the currency board again in order to have both fiscal and monetary tools in your hands? Is it not allowed by ECB or ECOFIN regulations? If governor says that Latvia cannot hope for the entry into Eurozone earlier than in 2012, then we still have 5 y. time, thus why not try have both fiscal & monetary tools in our hands and fix the problem of raging inflation?
In addition folks - today Latvian government passed the directive that starting from January 2008 the mandatory income and property declaration system shall be introduced, thus it´s official now (look into my Sunday´s entry)!! Huh, huh and I cant believe my eyes, because for the last half a year I was talking, writing and lecturing about the ombudsman institution and mandatory tax reporting system - and now within a week the governments has done all that, INCREDIBLE:)