Latvia becomes 18th nation to adopt euro
THE euro not only survived 2013, it thrived. And, at the stroke of midnight in Eastern Europe yesterday, the currency even added a new member.
Latvia is the 18th nation to adopt the euro, a development that might have seemed unlikely only two years ago, when many wondered if the euro would even survive.
"This is a major event, not only for Latvia, but also for the euro area itself, which remains stable, attractive and open to new members," Mr Jose Manuel Barroso, president of the European Commission, said in a welcoming statement.
The tiny Baltic nation is the first to join the euro zone since neighbouring Estonia in 2011. With 2.2 million people, Latvia is unlikely to shift the balance of power in the zone, which will have a total of 333 million residents. But Latvia at least keeps alive the idea that despite its problems the euro club still has potential to grow.
Polls showed that many Latvians were ambivalent about giving up their own currency, the lats. As a member of the currency union, Latvia no longer has the option of using the exchange rate as a safety valve in times of crisis.
However, the lats has been closely tied to the euro in any case. Many Latvians have mortgages or other loans denominated in euros, as is typical among countries in the European Union that are not also members of the euro zone.
Latvia's central bank has sought to maintain a stable exchange rate, in part to protect borrowers whose loan payments would soar if the lats lost value.
As a euro member, Latvia also gains more influence over monetary policy. The governor of the central bank, Mr Ilmars Rimsevics, will become automatically a member of the governing council of the European Central Bank, which sets benchmark interest rates for the euro zone.
Mr Rimsevics will have one vote on the council as its 24th member. At least on paper, he has the same clout as presidents of the central banks of larger countries like Germany or France.
Despite whatever doubts some Latvians may have about yoking themselves to a currency still emerging from a severe crisis, the euro signifies another stage in the country's trek from Soviet state to a full-fledged member of Europe.