- The euro area is not only the countries of the “old” EU. For several years now, residents of the Baltic states have also been paying with the Community currency
- The adoption of the euro by Latvia has brought dynamic wage growth over the years. Currently, the single currency shows that it also has disadvantages
- At the current euro exchange rate, prices in Latvia are higher than on the Vistula River, but for example, apartments are much cheaper. Also in relation to the average wage
- More such information can be found on the main page of Onet.pl
Located just over 250 km in a straight line from the Polish border, Latvia is hardly a country that attracts crowds of Polish tourists. According to the data of the local state statistical office, the number of Poles visiting this country in the last five years has decreased from just over 300,000. up to 66 thousand It’s about 3-4 percent. all visitors to this Baltic country every year.
Latvia is also not very frequent in the Polish media. The last few months are an exception, when this country with a population of less than two million, in which even every fourth inhabitant is an ethnic Russian, has put itself to Moscow in the face of the invasion of Ukraine. Latvians not only support the military efforts of the government in Kiev, but also take decisive movements in the symbolic sphere. It is even Renaming a fragment of Antonijas Street, where the Russian embassy stands, to the street “Niepodległości Ukraina” if blowing up the giant monument of the Red Army.
View from the windows of the Russian embassy in Riga.
Latvia adopted the euro 8 years ago – wallets have felt this
However, we will focus on how much it costs to live in this country. This is because Latvia adopted the euro in 2014 – 10 years after its accession to the European Union. Therefore, we decided to check what salaries and prices look like there.
If we compare the data on the average wages of a Latvian and a Pole, it turns out that Riga’s decision to adopt the euro has paid off for the inhabitants of this country in terms of the wealth of their wallets. The average Latvian salary from the beginning of 2004 until the day of joining the euro zone increased from 270 euro per month to 740 euro per month. This is a jump of 160 percent. For comparison, in the same period in Poland, the growth rate of the average gross salary amounted to 67%.
But let’s go a step further and see what has happened since Latvia joined the euro area. The data shows that from the beginning of 2014 to the end of the first quarter of 2022, wages increased by another 75%. In Poland, this increase was 60%.
What the net salaries say
However, comparing gross wages and salaries has the disadvantage that different countries impose public levies on wages to different degrees. This is where Eurostat comes in handy, calculating the average net wage in each Member State and converting it into euro.
For the purpose of comparing Latvia with Poland, we chose the net wages of a childless single earning the national average so that benefits such as 500 plus would not distort the picture. The data from 2014 clearly show that although the high growth dynamics of gross wages in Latvians visible in the previous charts did not translate into the fact that the citizens of the Baltic country actually had a larger household budget than Poles.
And so, in 2014, the aforementioned Latvian childless single received 78 percent net per annum. what its counterpart in Poland. Two years later it was almost 89 percent. The ratio of a Latvian pay to a Pole oscillates around 90 percent. lasted until 2019. In 2020, it was already over 94%, and in 2021 our Latvian single became richer than a Pole. Thanks to his work, he had a budget of 5 percent. bigger.
The problem with inflation
Having the euro has its dark sides, however. Especially in a crisis like the one we are facing today. Latvians have to deal with inflation exceeding 20 percent. y / y without the possibility of using the weapon available to Poland, for example, which is raising interest rates. In the euro area, they depend on the European Central Bank, which, however, has to take into account the situation in both Latvia, with 2 million inhabitants, and France, over 67 million, where inflation only exceeded 6%.
See also: Leakage from the ECB. Interest rate hikes in the euro zone may be higher
Such high inflation translates into the prices of basic products, which can be seen in the list we have prepared.
A visit to a Latvian supermarket
We chose 17 products and services for it that are the same for both countries. We obtained data from: two retail chains in both countries, one application for ordering purchases in both countries and the numbeo portal, and we averaged the results, excluding promotions. We converted Latvian prices into zlotys at the exchange rate from August 19.
The list shows that out of 17 selected products and services, only one is cheaper in Latvia.
What about the apartments
At the same time, however, although shopping or eating in Latvian restaurants is clearly more expensive than in Poland, the cost of living is not necessarily the case. In 2020, according to the latest available Eurostat data, the average Latvian household spent 23.3% on housekeeping. budget. For comparison, in Poland it was 20.9 percent. At the same time, according to data collected by the Numbeo portal, the rental of an apartment in Latvia (euro exchange rate from August 19) was by approx. 50 percent. lower than in Poland (we compare the same category of one-bedroom apartments in the city center). A similar disproportion applies to the cost of purchasing a square meter of a flat. However, it is impossible not to note the fact that, according to Eurostat, housing prices, like wages, in Latvia grow stronger than on the Vistula River. If the average price per square meter of an apartment from 2015 is taken as the starting value, then in Poland the purchase price increased by 47.7%. In Latvia, by 61.5 percent. At the same time, the aforementioned net wage of a Pole increased by 28.5%, and a Latvian by 64.7%.
On the basis of these data, it is difficult to say that the adoption by Latvia in 2014 made the inhabitants of this country impoverished. And exactly such an argument against the common currency appeared in the public discussion, although the adoption of the euro in Poland is even technically unattainable.