luis de guindos : fostering resilience and convergence in economic and monetary union keynote speech by mr luis de guindos, vice - president of the european central bank, at the conference " five years with the euro ", latvia, 7 january 2019. * * * it is an honour to have been invited here today to celebrate the fifth anniversary of latvia adopting the euro. of course, this year also marks the 20th anniversary of the euro. such anniversaries are a good opportunity to look back and reflect on what has been achieved over these years, and to think about what steps we now need to take to ensure that the coming years will be prosperous for everyone in the euro area. latvia joined the euro area at a difficult time. inflation in the euro area was low, and the risks of deflation and a de - anchoring of inflation expectations were high. now, the monetary policy measures taken to foster recovery have paid off. today the euro area can look back on more than five years of economic growth, with over nine million more people employed now than at the start of the recovery. in terms of growth, latvia in particular has really shone during this time. as a result of this continued growth, we in the governing council of the ecb confirmed at our meeting last month that we are confident the sustained convergence of inflation to our inflation aim will proceed. as a result, net purchases under our asset purchase programme ended last month. the end of net asset purchases does not mean that monetary policy accommodation has ended, however. substantial accommodation will continue to be provided by our forward guidance on key policy rates and our policy of reinvesting the sizeable stock of assets acquired. moreover, further efforts are required to reinforce structural resilience, boost productivity growth and sustain economic convergence within the euro area. introducing structural economic reforms, building up buffers and completing the single market are all key here. i would therefore like to take this opportunity to draw some lessons from latvia ’ s experience within the euro area to consider what specific steps can be taken to ensure the long - term success of the euro. five years of the euro in latvia joining the european union and the euro area has been a good experience for the latvian economy overall. when the euro was introduced 20 years ago, gdp per capita in latvia was around 30 % of the average for the then 15 members of the eu. today, that figure is around 60 %. although latvia certainly suffered during the financial crisis, its

economic growth in the five years since it joined the euro has been strong. during the first three quarters of 2018 growth was close to 5 %, one of the highest rates in the eu and the euro area. this convergence towards the european average is in no small part due to the process of accession to the eu and the euro area. implementing necessary reforms and taking steps to reduce government indebtedness to meet the debt and deficit criteria have achieved results. latvian credit ratings have gradually, and stably, improved. borrowing costs have fallen markedly, with spreads to german bunds averaging around 40 basis points in 2018, compared with 170 basis points before the adoption of the euro. these lower funding costs have in turn resulted in significant government budget savings. 1 more importantly, economic growth in latvia is more balanced than in the past and based on a more resilient economy. sustaining convergence, however, is a process, and cannot be ensured by a one - off set of reforms for accession. a comparison with peer member states such as 1 / 4 bis central bankers'speeches slovenia, slovakia and neighbouring baltic countries suggests that there is further scope for latvia to catch up in terms of gdp per capita. reforms boosting productivity growth and investment in innovation are essential to sustain the high rates of wage growth currently seen in the economy – of close to 8 % – and thus to prevent competitiveness losses in the future. improvements in overall institutional quality – a fundamental pillar of long - lasting economic growth – have been somewhat slow in latvia since it joined the euro area compared with several other eu countries. nonetheless, the recent policy measures taken by latvian authorities are welcome. in particular, measures taken to prevent money laundering and the financing of terrorism, as well as steps taken by banks serving foreign clients to refocus their business models, are examples of notable reform efforts which need to be continued with persistence and determination. these efforts should be buttressed by strengthening the foundations for sustainable economic growth, for instance by building up fiscal buffers and taking appropriate macroprudential measures. fostering structural resilience and sustainable economic convergence in the euro area looking at the need for structural reforms more broadly, more needs to be done in the euro area as a whole. the past 15 to 20 years show that euro area countries with sound economic structures from the outset have achieved much higher long - term real growth and are more resilient. countries which adopted ambitious reforms during the crisis, such as latvia, recovered faster than others, with