Latvia prepares for 2014 eurozone accession


While Poland, Bulgaria and the Czech Republic have shelved plans to join the common European currency anytime soon, Latvia announced that it wants to become the 18th eurozone member in early 2014. 

Germany praised Latvia for his courage in continuing to seek membership to the eurozone, the Baltic Course news site reported. Ruprecht Polenz, a member of the Bundestag's Foreign Affairs Committee, told Latvian President Andris Brezins during their meeting in Riga on 20 September that Latvia’s position was “a wonderful international signal” for the future of the euro.

Recently, Poland, the Czech Republic and Bulgaria indicated that they would hold off on joining the single currency until the eurozone resolves its debt crisis. According to their accession treaties, all 12 members of the EU enlargement of 2004-2007, most of them from Central and Eastern Europe, have the obligation to join the euro as soon as they are ready.

According to the website Business New Europe, a recent NATO conference held in Riga on 14-15 September was a “virtual fanfare for the euro”, with leaders from Latvia, Lithuania and Estonia all predicting a great future for the EU’s common currency.

Estonia joined the euro in January 2011 and has seen its economy grow. Prime Minister Andrus Ansip has vowed to bring the country’s GDP per capita into the top 5 for the EU by 2022.

In Lithuania, a non-eurozone member that is due to assume the rotating EU presidency in the second half of 2013, the economy had a good year in 2011 and economic activity is expected to increase by 2.4% in 2012.

During the economic crisis, Latvia's economy plummeted 18%, the worst in the European Union, and it became the first EU country to seek a bailout – €7.5 billion – from a group led by the International Monetary Fund. Since then, the situation greatly improved, but the country still has to correct its excessive deficit, fight unemployment and tackle the high rates of poverty.

Latvian Prime Minister Valdis Dombrovskis reportedly said at the NATO conference that his country plans to meet all the Maastricht criteria governing euro adoption by the end of this year in order to qualify for swapping the lat for the euro in January 2014.

The Bank of Latvia forecasts that switching to the euro would boost the county’s real GDP by 7.4%, investment by 15.9%, exports by 5% and would lower long-term interest rates by half a percentage point by 2020.

Uldis Rutkaste, the bank's head of monetary policy, admitted in an interview that public opinion remained “equivocal at best” due to the “negative news” coming from the eurozone.

An August survey of more than 1,000 Latvians by the Latvijas Fakti pollster showed that just 35% supported euro adoption with 59% declaring themselves against and 6% undecided. However, most analysts quoted by Business New Europe agree that what looks like a high degree of euroscepticism may not be as strong as it first seemed.

Ivars Ijabs, a political expert at the University of Latvia, said the question of euro adoption is not one that gets people particularly excited. “Most probably, Latvia will enter the eurozone as it entered the EU – without much debate, as it is more or less self-evident that Latvia has to be there," Ijabs said.

Further Reading