EU Institutions Greenlight Latvia's Eurozone Membership

Photo: Reuters/Scanpix
6/5/2013 4:52 PM
Category: Economy

Reports published today by the European Commission and the Central Bank have deemed Latvia ready to adopt the euro from January 1 of next year.

“Latvia’s experience shows that a country can successfully overcome macroeconomic imbalances, however severe, and emerge stronger,” Commission Vice-President Olli Rehn said in a press release today, adding that Latvia took decisive measures, which have paid off, with Latvia forecast to be the fastest growing economy in the EU in 2013.

The inflation rate for Estonia's southern neighbor was at 1.3 percent last year, well below the reference value of 2.7 percent. Budget deficit-to-GDP ratio was cut from 8.1 percent to just 1.2 percent in 2012 and the government's debt to GDP ratio is 40.7 percent, one of the lowest in the union.

In a separate report, also released today, the European Central Bank (ECB) paints a slightly less rosy picture of the Latvian economy, forecasting higher inflation rates and noting concerns over long-term sustainability of economic convergence and high levels of reliance by the banking sector on foreign owned deposits.

However, the ECB also concluded that Latvia is ready for the euro.   

Latvia formally applied to join the Eurozone in March this year, and the final confirmation by the Economic and Financial Affairs Council to seal the deal is expected in July.

Ligi welcomes Latvia

“I am pleased with the European Commission's decision today, and with Latvia's effort. Latvia took the only correct option available to a small state, and a very European option at that,” Estonia's finance minister, Jürgen Ligi, said in a press release today.

Ligi said that he is sure Latvia will also play a role, as Estonia has, in helping those countries in the Eurozone who find themselves in need of assistance. He added that Latvia is a great example for struggling EU members of how past mistakes can be quickly fixed.


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