Latvia To Join the Eurozone

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Latvia, the small state facing the Baltic Sea, is set to be bid farewell to its national currency to become the 18th state to join the single currency market, the Eurozone.

The European Commission, in a report released earlier today, stated that Latvia “has achieved a high degree of sustainable economic convergence” with the Eurozone, enough for the 27-member executive branch of the European Union to propose for Latvia’s adoption of the Euro in 2014.

According to the report, Latvia has passed all requirements to be eligible for membership in the Eurozone including low inflation, public deficit and debt, interest rates, and exchange rate fluctuations against the Euro.

Latvia’s inflation rate in the last 12 months to April 2013 was well below the 2.7% target of the Eurozone, at 1.3% and is seen to stay in that range, but the EC warned the former Soviet state should remain vigilant in keeping the inflation at low levels by securing a prudent fiscal policy and sustainable domestic demand.

The country’s government-to-debt ratio had also been significantly reduced from 8.1% in 2010 to just 1.2% in 2012, following stringent government austerity measures it adopted to survive the 2008-2009 financial crisis.

Latvia’s GDP shrank by about a fifth during the said crisis and was bailed out by the EU and the IMF for €7.5 billion, a loan that has already been repaid.

At a press conference in Brussels, Commission Vice President and Economic and Monetary Affairs minister, Olli Rehn, stated “Latvia’s experience shows that a country can successfully overcome macroeconomic imbalances, however severe, and emerge stronger out of the crisis with a solid recovery.”

Sign of Confidence

Latvia’s desire to join the Euro, Rehn added, also meant a “sign of confidence” in the common currency even as the region experienced six consecutive quarters of recession, growing unemployment, and member states receiving bailouts to avert collapse.

Whilst Rehn hailed Latvia’s entrance to the Euro as a rebuke to those who predicted a break-up of the common market as a result of the sovereign debt crisis, public opinion in Latvia itself is on the other end of the spectrum.

One poll revealed a greater majority of the Latvians are against joining the Euro, although the numbers of those in favour grew with the country’s Prime Minister saying support for the move will increase once it is implemented.

A final vote for Latvia’s inclusion in the Eurozone will be made on 9 July 2013, though this is seen as a formality.

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