Latvia’s bid to become the 18th country in the euro area won final approval from European Union finance ministers, ensuring that the former Soviet republic will start using the single currency on Jan. 1, 2014.
The ministers set the conversion rate for the lats at 0.702804 per euro, the last hurdle in Latvia’s euro push after the government in the capital Riga met budget-deficit, government-debt, interest-rate and inflation targets.
Latvia “should stick to the core European decisions and those decisions are coming from the euro-zone members today we can see,” Finance Minister Andris Vilks said in an interview with Bloomberg Television late yesterday. “The euro zone is much more important than it was maybe some years ago.”
Latvia’s currency switch comes after it was forced to seek a 7.5 billion-euro ($9.7 billion) loan from the EU and International Monetary Fund after its second-biggest bank needed a state rescue, threatening its currency peg to the euro. The country’s economy, which shrank by more than a fifth in 2008-2009, is now the bloc’s fastest growing.
Much has changed since Latvia’s recession, the world’s worst at the time. Austerity measures equivalent to 16 percent of economic output helped the government narrow last year’s budget gap to 1.2 percent of gross domestic product from 9.8 percent in 2009. The IMF’s portion of the bailout was repaid almost three years early.
About 53 percent of Latvians oppose adopting the euro, compared with 59 percent a year ago, pollster Anris Kaktins told Latvijas Radio today. Some 22 percent support switching currencies and 21 percent have a neutral view, according to the mid-June poll, Kaktins said.
“I’m quite confident that we will reach 50 percent support by the end of the year,” Vilks said last night.
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