The European Commission has given its approval to allow Latvia to adopt the euro as its national currency. The small country on the Baltic Sea would become the 18th nation to adopt the euro.
A statement released by the European Commission on Wednesday said that Latvia had "achieved a high degree of sustainable economic convergence with the euro area" and recommended that the Council of Europe clear the way for Latvia to enter the eurozone on January 1, 2014.
EU Economy Commissioner Olli Rehn praised Latvia for its efforts to combat economic challenges during the global financial crisis and said the country had emerged stronger as a result.
"Following the deep recession of 2008-09, Latvia took decisive policy action […] which improved the flexibility and adjustment capacity of the economy." Rehn said in a statement. "This paid off: Latvia is forecast to be the fastest-growing economy in the EU this year."
The Commission's review of Latvia's application to adopt the euro – which it submitted in March – included checks on inflation, public finances, interest and exchange rates, and legal requirements.
In the review, the Commission found that inflation in Latvia was at 1.3 percent, well below the reference value of 2.7 percent. Latvia's currency, the lat (pictured), has also been tied to the euro since 2005. This means the currency is not allowed to fluctuate more than 1 percent in either direction against the euro for a minimum of two years.
Now that the Commission has given its approval for Latvia to start using the euro, the European Parliament, ECOFIN Council, and Council of Ministers will also weigh in by July and likely approve the final piece of the puzzle of irrevocably fixing the lat to the euro.
The lat would then be physically replaced by the euro on the first day of 2014.
mz/kms (AFP, Reuters, AP, dpa)