Latvia becomes the 18th member of the Eurozone

Deutsche Welle, 1 January 2014

Latvia has become the 18th member of the euro currency bloc. The EU approved its bid in the summer after the Baltic nation bounced back from recession to record impressive growth.

Latvians had awaited midnight on Tuesday (2200 UTC) with great anticipation of what 2014 would bring, particularly with the country's transition from the lat to the euro. Prime Minister Valdis Dombrovskis was scheduled to withdraw the first euro bills from an ATM in the capital city Riga at a ceremony coinciding with the new year.

"I am delighted to welcome Latvia as the 18th member of the euro area," European Commission President Jose Manuel Barroso said in a statement. "This is a major event, not only for Latvia, but for the euro area itself, which remains stable, attractive and open to new members."

ECB Central Bank chief Mario Draghi called Latvia " a role model as far as fiscal adjustment is concerned," in an interview with the news agency AFP.

A real estate bubble during the financial crisis of 2008 and 2009 threw Latvia into recession. In order to avoid bankruptcy, the country's prime minister secured a bailout from the European Union and the International Monetary Fund (IMF) worth 7.5 billion euros ($10.23 billion) and also steered Latvia toward deep austerity measures. The move was credited with the country's five-percent economic growth recorded for the 2011-2012 fiscal year, the top growth rate in the European Union at the time.

One in four fear euro

The introduction of the new currency comes some two decades after Riga adopted the lat and has concerned some in Latvia of increased foreign influence on the Baltic country's economy. Moreover, a 5 percent jump in inflation in neighboring Estonia, which switched currencies in 2011, has raised fears that the euro could cause more harm than good.

SKDS polls taken in December indicated that disapproval of the new currency had dropped slightly among the Latvia's two million inhabitants, falling to about 25 percent.

The ECB has reportedly estimated inflation to expand by roughly 2 percent in Latvia.

Latvia joined the European Union in 2005 and was approved to join the euro currency union in early July. It becomes the 18th member of the eurozone, but only the second Baltic nation and ex-Soviet nation to do so. Lithuania is expected to join the eurozone at the beginning of 2015.

kms/se (AP, AFP)