Last Wednesday, the Commission published its much-awaited assessment of Latvia’s readiness to adopt the euro. I was very pleased to be able to announce that Latvia meets all the conditions to join our common currency.
While the final decision on Latvia’s entry to the euro area will only be taken by EU finance ministers in July, after the European Parliament has given its opinion and the EU leaders have discussed the subject at their summit meeting on 28-29 June, the Commission’s announcement is a decisive step for Latvia to join the euro.
I congratulate Latvia and its people on this positive assessment by the Commission. It marks an important milestone in Latvia’s history. Since the nadir of the crisis in 2009, Latvia has managed a very difficult economic adjustment process. I have no illusions about how hard the crisis hit the Latvian people.
Yet determined implementation of the EU-IMF-led assistance programme helped the country to reform and to return to economic growth. Indeed, we expect Latvia to be the fastest-growing EU economy this year. While many challenges remain, including high social inequality and unemployment, Latvia is now widely seen as a positive example for euro area countries in difficulties. Determination and tough decisions have allowed Latvia to emerge much stronger economically than before the crisis.
I am confident that introducing the euro will bring a range of benefits to everyone living in Latvia. These include the elimination of exchange rate risk, savings on currency exchanges, lower transaction costs and more favourable financing conditions for Latvian businesses, and better price transparency for consumers. The government’s borrowing costs should also decrease further, so less money will be spent on servicing the country’s debt. Most importantly, joining the euro will anchor perceptions of Latvia as a stable and well-respected partner at the core of European integration.
Of course, this is not the end of the road. It will be essential to continue with sound macroeconomic and structural policies, to further strengthen institutions like the judiciary and financial market supervision, and to keep enhancing the competitiveness of Latvia’s economy.
In the months ahead, the Commission will be working closely with the Latvian authorities to ensure that people are adequately informed about the practical aspects related to the changeover from lats to euro. The authorities will continue making regular checks, so that businesses and traders do not use the euro changeover for unjustified price increases. Latvia can learn from the successful changeover experiences of Slovakia, Estonia and other countries.
I am also confident thorough technical preparation of the changeover, balanced and fair communication on its most sensitive aspects and more encouraging news coming out of the euro area will result in higher public support for the euro. We have seen this in Estonia, where support for the euro was similar to current euro support levels in Latvia, at around 37% in May 2010, seven months before the changeover. Today, support for the euro in Estonia exceeds 70%.
As for the concerns of Latvians that their country will lose a part of its sovereignty on joining the euro, I would argue that the opposite is true: as a member of the euro area, Latvia will participate for the first time in decision-making on issues that already affect the country now, as an economy that is deeply integrated with the economies of the euro area. For the first time, Latvia will have a seat at the table when key decisions are made in Brussels in the Eurogroup, and in Frankfurt on monetary policy. In view of Latvia’s difficult history, joining the euro area will further cement Latvia’s place in Euro-Atlantic structures, thus irrevocably strengthening national sovereignty.
I understand the regrets about losing the lats, which is seen as an expression of national identity. However, being part of Europe has been and remains a central part of Latvia’s national identity, and joining the euro area will further strengthen this course. Besides, Latvians have decided that the reverse side of the euro coins will carry the profile of the national symbol, Milda. This will provide continuity with the first period of Latvian independence of 1918-1940, when the widely-admired 5-lats silver coin featured Milda as well. Latvian euro coins will travel to all corners of Europe, further enhancing Latvia’s international recognition and identity.
A final thought. I have followed the Baltic states’ path to Europe very closely over decades, and I visited Riga for the first time over 30 years ago. I recall a discussion with a Latvian friend of mine around 1997-98. That was a time when Estonia had a chance of becoming an EU candidate country, which was not yet realistically the case for Latvia and Lithuania at that point in time. My friend said, “You should support all three Baltic states, not only one becoming a candidate country.” I recall responding that “now the choice is not one or three, but one or none.” In fact, Estonia being in the first group of six that started the negotiations on EU accession, was a factor in opening the gates of Europe for all Baltic states and paved the way for their EU and euro membership. Today, all three Baltic states are either inside or well on their way to the economic and political core of Europe. And that it is indeed great news.Tags:competitiveness of Latvia's economy, congratulate Latvia and its people, determined implementation, great news, Milda, national symbol, positive example, unjustified price increases