Green light for Latvia's membership of the Eurozone

The European Parliament today voted on Latvia joining the Euro, giving its green light for the Baltic country to become the 18th member of the Eurozone on January 2014. Latvia is the second Baltic country to join the Euro after Estonia in 2011. The EP Report, authored by Burkhard Balz MEP, was approved with a large majority.

"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 percent of GDP which is amongst the best figures in the EU", said Burkhard Balz MEP.

The fact that Latvia will join the Eurozone is a strong signal of confidence in the common currency and a positive signal to the markets.

Latvia was one of the hardest hit countries in the world by the 2008-09 financial crisis. The sudden stop 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 frontloaded 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. 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 developments.

“Latvia 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", added Latvian MEP Krišjānis Kariņš.

The last, final step to complete the procedure of the accession will be the decision of the ECOFIN Council on 9 June.

Latvia committed to join the Euro in 2004 when it became a member of the EU. The Latvian national currency- the lats - has been pegged to the Euro since 2005.