In approving the country as the 18th eurozone member, MEPs cited Latvia's "extraordinary efforts to overcome the financial crisis".
"Latvia has overcome the 2008 crisis by working very hard, painfully, but in the end successfully, on its budget consolidation. The country is now ready to join the euro in an exemplary manner. Public debt is currently at 40% of GDP, which is amongst the best figures in the EU," said German MEP Burkhard Balz, a centre-right member of the economic affairs committee.
Latvia was one of the hardest hit countries by the 2008-09 financial crisis. The sudden halt of capital flow combined with the unwinding of internal macroeconomic imbalances lead to a GDP decline of 20.5% from 2007 to 2010.
Faced with such circumstances, Latvia enacted austerity measures and implemented structural reforms while maintaining the exchange rate pegged to the euro.
This allowed Latvia to rebalance the economy, regain competitiveness and return to positive growth, explained Balz. As a result, productivity and the wage gap that opened during the boom years have closed and wage growth is now in line with productivity.
Latvian Finance Minister Andris Vilks said adopting the euro will complete Latvia’s strategic goal of belonging to the core of Europe.
“It’s an anchor for our economy,” he told reporters today in Strasbourg. “We are looking to growth.”
Latvian MEP Krišjānis Kariņš said his country did not "waste" the financial crisis.
“Instead, it used the opportunity to implement fundamental reforms in its economy, which are now bearing the fruit of sound economic growth. One of the side effects of reforms is a stable and sustainable macroeconomic environment which provides the opportunity to join the eurozone", he added, stressing the country will continue to pursue reforms in education, the judiciary and energy security.
MEPs stressed that Latvia must maintain the pace of reform, strengthen its national economic government structures and reduce its shadow economy.
Although public opinion support for the euro risen in recent months, still only a minority (38%) back the switch from the lats to the euro, polls show.
People are concerned about what they hear in the news, more than a real opposition to the euro, Vilks added.
Kariņš also explained that rather than a lack of support for the euro, people are reluctant to abandon the lat they are sentimentally attached as it symbolises the former Soviet state's independence.
The last, final step to complete the procedure of the accession will be the decision of the Ecofin Council on 9 July.