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Vilks to Lembergs: showman’s tricks are not enough to secure a budget in the interest of society

Andris Vilks/LETA.
«Everyone knows about Baron Münchhausen, who earned world fame with his unbelievable stories, but many do not know that Latvia has its own Baron Münchhausen from Ventspils. I have talked about him in 2011. However, to make sure everyone can understand what we are talking about, I believe it is worth mentioning a few fundamental ABCs Mr Lembergs is either unaware of or uses them to manipulate public opinion,» – says Latvian Finance Minister Andris Vilks.

«First – about borrowing. All countries borrow money from either international financial markets or internal ones. However, prices differ from country to country. One of the main criteria is the country’s finances; the more disciplined the country, the lower the deficit and external debt, the cheaper the borrowing.

In 2010, the lowest point of the crisis, Latvia borrowed money from the International Monetary Fund and the European Commission, because international financial markets were not prepared to provide Latvia with finances because of the state of the country’s economic and financial systems. Now we are obligated to return this money. Thanks to the fact that our country’s finances have been sorted out and all macroeconomic indexes are positive, Latvia can afford borrowing money from international markets at rates that are lower than those of IMF and EC,» – said Vilks.

He continues: ‘Secondly, none of the countries of the European Union, including Greece, have had their debts written off by international organizations. Only part of Greece’s commercial banks’ state debts have been written off, and it was the private sector that paid the most for the country’s living in debt. Lembergs’ commentaries on this matter allow for the possibility that he finds it difficult to differentiate between state and private finances.

«Thirdly, it seems that Mr Lembergs’ understanding of state finances is based on the principle – borrow, spend and never pay back. It is the surest way towards a dead end. The foundation of economic development lies in sorted out finances and not spending more than you owe. It was the course chosen by me as the country’s Finance Minister and it is my contribution to the national economy. Let’s not forget that sorted out state finances are also a requirement for borrowing for reasonable rates.»

«As for the state debt, it seems that Mr Lembergs does not understand that even the state debt brings money. In order to pay back the loan provided by EC in 2015, Latvian State Treasury had borrowed money in external financial markets in 2014 at the lowest rates recording in Latvia’s history. So it seems what we have here is something Mr Lembergs does not know – refinancing of the state debt for the lowest rates. Had he known this term, he would have been not be so surprised when the debt had increased in 2014 and is expected to significantly decline in 2015. It should be added that even without checking the numbers mentioned by Mr Lembergs I can say that the debt’s reduction by 3.3 percentage points allows the state to save EUR 26 million in debt maintenance costs.

In an attempt to demonstrate his competence in matters of the state budget, Mr Lembergs has noted that a comparison of state expenses of 2010 and 2014 shows that revenue has increased, but he does not understand which sectors have been provided with additional finances. I can remind Mr Lembergs that the defence budget has increased 16% (EUR 31 million), the education sector has been provided with EUR 78 million in additional funding and healthcare sector will receive an additional EUR 70 million,» – said Vilks.

«In regard to Mr Lembergs’ economic skills, I will allow myself to mention that Ventspils municipal budget lost more than EUR 1.4 million in 2014 only because Mr Lembergs wanted to maintain the same level of collection of PIT.

In order to take part in the management of state finances, it is necessary to have at least basic understanding of budget-formation principles. A showman’s talent is not enough to approve a budget in the interest of society. I do not agree with anyone who encourages others to leave unreasonably high debts for Latvia’s next generations. Management of this kind is not worthy of a politician and state official,»- says Vilks.

Lembergs had previously voiced several criticisms to the minister, believing that Vilks had somehow offended him. Lembergs expressed this after Vilks, who has decided to leave politics, warned that stagnation for the new coalition would be a triumph for Lembergs.
23-10-2014
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