Latvia poised to join euro despite popular reluctance

Latvia won a resounding vote of approval from the EU executive Wednesday to become the 18th eurozone state, though ordinary Latvians seem fearful of ditching their national currency as the euro area struggles in recession.

Commending the Latvian government for successfully steering the country out of crisis in 2008-2009, the European Commission said in a report: “Latvia is ready to adopt the euro in 2014.” The report will be handed to the European Parliament for approval, with finance ministers from the 17 euro nations to formally hand down a decision July 9 on Latvia joining.

Shrugging aside strong popular opposition to the move, Latvian Prime Minister Valdis Dombrovskis welcomed the news, saying in Riga that “joining the euro will benefit Latvia’s economy by removing currency conversion costs and raising Latvia’s credit rating.” “Latvia is a small, open economy,” he said. “We think euro membership will increase investment activity. We need only to look at the Estonian example where investment in the non-financial sector doubled.” Latvia joined the European Union in 2004.

But given the eurozone’s protracted crisis, a majority of Latvians question the wisdom of abandoning the lats for the euro on January 1.

The most recent opinion poll, a May survey from TNS, said only 36 percent of Latvians favoured switching, with 62 percent against, though this was far less than a few months ago.

The Brussels report said the country of two million people satisfied the economic conditions to join, due to its price stability and sound public finances. Its national legislation too was compatible with the rules of the Economic and Monetary Union (EMU), it said.

It also lavished praise on the government for its handling of the 2008-2009 crisis.

“Latvia’s experience shows that a country can successfully overcome macroeconomic imbalances, however severe, and emerge stronger,” said EU Commissioner for Economic Affairs Olli Rehn.Saying Latvia was expected to be the fastest-growing EU economy this year, Rehn added that its willingness to adopt the euro “is a sign of confidence in our common currency and further evidence that those who predicted the disintegration of the euro area were wrong.” But even as Riga awaited the report, protests continued in Latvia.

“People don’t want the euro. Parliament should listen to the people’s wishes,” Girts Mazurs, who launched a petition that has gathered more than 10,000 signatures, told a parliamentary committee.