Dear honourable guests and conference delegates!
I am delighted to open today’s conference and welcome you to discuss the future of our economies and the euro area.
It is a great honour for me to speak to such a distinguished audience here today.
2022 is a special year for Latvia. This year we celebrate one hundred years of the three pillars of Latvia’s sovereignty.
The Constitution of the Republic of Latvia, Satversme, was adopted on 15 February 1922, whilst the first President of Latvia, Jānis Čakste, was elected in November of the same year.
Also, in the autumn of 1922, the Bank of Latvia came into being by a decision of the Government and ever since it has been the guardian of Latvia’s monetary stability.
Since the restoration of independence in 1991, Latvia has lived through its fair share of challenges.
We truly know what it means to transform our economy.
Having been at the centre of our financial system for so long, the Bank of Latvia has been a stabilising and guiding force.
It is therefore natural that today our central bank is one of the key institutions to drive change and contribute to tackling the future challenges of our society.
Climate change and the transition away from the fossil-based economy are the biggest of them all.
We are glad to welcome you to Riga once again. During your visit in 2012 as the Managing Director of the International Monetary Fund, you encouraged Latvia to join the eurozone.
You quoted the great Latvian poet and playwright Jānis Rainis: “Those who change will endure.” I am happy to say today that your encouragement seems to have worked, as Latvia is a member of the euro area already for eight years.
Together with our European partners, we are now focusing on common goals and shaping the policies in the increasingly complex modern economies.
We recognize the need to invest our trust in the EU’s institutions and structures, to have the ability to respond to the fundamental needs of our citizens.
We live in a time with growing geopolitical security threats, including a full-scale invasion of a sovereign country in Europe and increasingly autocratic regimes challenging the rules-based international order. Which is base of peace in the world.
As a result of Russia’s aggressive war in Ukraine, we are now in the middle of an energy crisis and rising inflation rates across Europe.
As we prepare for the winter, there is no easy solution to the current energy crisis.
Only that we must isolate Russia economically and rid ourselves of prolonged dependence on its natural energy resources.
Since the beginning of the war, Latvia provides the most aid to Ukraine by % share of our GDP. Ukraine is fighting also on behalf of all of Europe and our values.
Next week I am going to attend COP27 in Egypt. We will discuss that the shift toward cleaner sources of energy still is not happening fast enough to avoid dangerous levels of global warming.
Every crisis is an opportunity. The International Energy Agency has said in its World Energy Outlook report that Russia’s invasion of Ukraine will accelerate a peak in the world’s consumption of fossil fuels. Let us use this crisis wisely.
I am glad the Bank of Latvia advocates a more comprehensive inclusion of sustainability objectives in monetary policy. However, there is also a role for the commercial banking sector to become a more active participant in shaping Latvia’s future economy.
Finally, we need to develop Latvia’s capital market to have new channels of financing and investments in the green transition.
Whilst the role of central banks evolves in the complex world of the 21st century, its independence is part of the accepted wisdom of modern economics and should remain as such.
European Central Bank's mandate of maintaining price stability in the euro area is laid down in the Treaty on the Functioning of the European Union.
In December 2018 I was one of the judges at the Court of Justice of the European Union who took part in the judgment on the question, of whether the ECB’s government bond-buying programs were within its price stability mandate.
We had to interpret from a legal point of view the famous three words of then ECB President Draghi “whatever it takes.”
These three words saved the Euro. But the question was whether this statement was within the mandate of the ECB.
In the judgment, we confirmed the independence of the ECB and the wide margin of appreciation of its mandate.
This ruling was later controversially contested by the German Federal Constitutional Court with implications extending well beyond the issues of monetary policy.
This controversy, which was later solved, shows that the benefits of central bank independence from political interference are undeniable. Politics on both – European and national levels – should preserve and respect it.
In Latvia irrespective of economic and political cycles, the Bank of Latvia can use its independence and analytical expertise to shape the public debate and overall decision-making culture.
The ECB runs a single monetary policy for 19 European countries – soon to be 20 – which have their own fiscal policies and their own appreciation of the fiscal discipline.
How will the current level of inflation affect the ECB’s fiscal-monetary policy mix? In short, we do not know yet. However, more than before we need EU governance structures that provide adequate and effective crisis responses.
Many topics in today’s conference will be about the future of financing and our transition towards greener economies.
I consider the digital transformation of our societies as one of the most important tasks.
The digital space has become a vital part of our lives, especially after global pandemic lockdowns. It has enormous potential to contribute to the sustainable development of our economies.
In Latvia, we support innovative and proven digital solutions that promote the efficiency of public administration, public participation in decision-making and the creation of new economic opportunities.
To protect the strategic autonomy of European payments and monetary sovereignty, ECB is working on introducing a digital euro in near future.
However, to ensure that citizens can continue to trust our currency, we must ensure their privacy is prioritized in this process.
Security threats in cyberspace are increasing. If the digital euro is introduced the data collected should never be passed on to third parties and used for the surveillance and tracking of citizens.
Therefore, in parallel with technological developments, we should actively define new legal principles to avoid risks and damage to citizens’ rights and freedoms.
My firm opinion is, that only when all the issues of privacy, and the danger of possible spying, tracking and controlling people are answered in consistency with citizens’ rights and the rule of law, we can go on with the creation and introduction of digital euro.
Ladies and gentlemen,
The euro is shared by over 340 million Europeans.
However, we share more than a single currency. We share common values, laws and interests, which must be defended at all times.
The EU's strength is in close cooperation amongst ourselves, with our transatlantic and like-minded partners.
We are changing together, and we will endure together.
I wish you all a successful conference and fruitful discussions!