Kariņš: Tightening the Belt Too Hard During Growth Could Harm the Economy

If a government tightens its belt too much while the economy is growing, it may cause problems. This was stated by Krišjānis Kariņš, a former prime minister of Latvia and leader of the New Unity (JV) party, on the TV3 podcast "Piķis un ģēvelis!". His assessment concerns the Latvian government's budget and spending policy.

Kariņš said that, for the first time in Latvia, foreign direct investment not linked to European Union (EU) funds has reached one billion euros. He also noted that gross domestic product (GDP) growth in the country this year could be around 2.5%.

Warning about austerity

The politician stressed that these figures point to growth. In his view, if the government begins to tighten the belt too sharply, that growth will be stifled. According to Kariņš, this would mean less money and fewer taxpayers.

Defence spending

Kariņš also emphasised that Latvia must work with its European partners so that the EU defence spending exemption granted to Latvia remains in force in 2030. It allows such spending to reach up to 1.5% of GDP.

Kariņš is currently a senior adviser on geopolitical issues at Kreab, an international strategic communications agency.