The economic and financial affairs council of the European Union (Ecofin) passed on July 9 a decision allowing Latvia to adopt the euro as its currency as of January 1 2014.
The Ecofin council said that euro notes and coins will be issued on January 1, with the conversion rate is set at 0.702804 Latvian lats to one euro, which corresponds to the current central rate of the lats in the EU’s exchange rate mechanism, ERM2.
Over the past month, the European Central Bank, the European Commission and the European Parliament have all given favourable opinions on the issue, the European Commission said in a statement.
Latvia, like the rest of the countries that joined the European Union in the 2004 and 2007 eastward expansions, is required to join the euro zone. The country made a formal request to be admitted in March, saying that it met all the Maastricht criteria for euro zone membership.
The Maastricht criteria are a set of several macroeconomic indicators – budget deficit, government debt, inflation and interest rate fluctuation. Applicant countries are also required to have spent at least two years in ERM2, during which time the exchange rate fluctuations must be kept within a certain range; Latvia entered the ERM2 in May 2005.
Despite being one of the EU countries hit the worst by the global financial crisis in 2008, Latvia recovered quickly after adopting austerity measures that included public sector wage cuts and tax hikes, helped by an International Monetary Fund bailout.
Latvia will become the 18th member of the euro area, out of 28 EU member states. The euro zone was officially created in 2002, when it comprised Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Austria and Finland. Over the years, it was expanded to include Slovenia (which joined in January 2007), Cyprus and Malta (January 2008), Slovakia (January 2009) and Estonia (January 2011).
(Photo: Steve Ford/sxc.hu)