From 1 January 2014 Latvia will become the 18th member of eurozone. Latvia meets the Maastricht criteria for euro stability. But tax cuts to attract foreign capital causes concern among some experts who believe that policy is risky. Some experts are warned about the possible appearance of "new Cyprus".
Since 2010, when Parliament passed a law allowing foreigners to obtain a residence permit in Latvia, foreigners invested in the Latvian real estate more than €377 million. Economist Yanis Ošlejs is concerned that Riga is trying to raise capital by selling property to Russians and citizens of other post-Soviet countries. "If Latvia will not be able to achieve rapid growth in key industries to create a solid foundation for the economyk, the country will come to an unstable pyramid, which we have seen in Cyprus," - he warns.
Meanwhile, Latvian Prime Minister Valdis Dombrovskis is sure that Latvia will not be a "new Cyprus". He soothes, "If Cyprus banking assets are 700-800 percent of GDP, in Latvia this ratio is only about 130% of GDP."
Adopted in January 2013, a new tax on corporations, which facilitates the creation of holding companies, has caused an increased interest in the creation of holding companies in Latvia from businessmen from CIS countries who want to take their business to Latvia.