The lucid and pragmatic Latvian adhesion to the Euro


The “national side” of the Latvian 2€ coin (Source: ECB).

The Eurozone has a new member: since Wednesday 1 January, Latvia has adopted the single currency and said goodbye to the lats – its national currency – which it had introduced in 1993 to replace the rouble, one of the last symbols of the USSR.  After Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009 and Estonia in 2011, Latvia has been the sixth Member State to join the Eurozone since the 2004 big enlargement.

Latvia discreetly joined the Eurozone in an upset context insofar so as according to a poll, a majority of Latvians is against the Euro, fearing inflation and a consequence on the power of purchase in a country where the average salary is about 500 euro. On this point, some politicians such as Iveta Grigule, Eurosceptic MP, tried to question the adhesion process by demanding (in vain) a referendum about the adoption or the rejection of euro.

Indeed, most Latvians consider the euro as an economic illusion much more constraining than advantageous. What is more, as highlights a recent article from the French daily Le Monde, Latvia is a poor country and adopting the single currency may be a risky challenge for a weak economy and the country might badly cope with competitiveness within the Eurozone, especially compared to Germany.

Being officially the eighteenth Eurozone member, Latvia is nonetheless in a realistic and pragmatic approach. Pragmatic because the Latvian government only implements the engagements it took at the moment Latvia joined the European Union; realistic because Riga hopes to be with the “big boys” of the EU and be at the same rank as them. For the centre-right coalition currently in power, adopting the Euro expresses the hope to make the Latvian economy more dynamic and competitive, something that the lats did not allow anymore. It is also the challenge that the Latvian economy will be much better within the Eurozone, enjoying the outcomes in a medium long term.

The adhesion of Latvia is, in spite of all, good news insofar so as this country respects its engagements and wants to get more involved in the European integration. Indeed, for the Baltic State (as for the rest of the recent Member States, according to their situation, let’s be honest), the EU is, before all, the guarantee of a positive future but also a symbol of economic prosperity. Adopting the euro, nearly ten years after the 2004 adhesion is a sign of prosperity insofar so as it allows to Latvia (as Estonia before and Lithuania soon) to consider itself as a full-fledged European country and definitely turn the back to Moscow and the Russian big brother.

It is by pragmatism Latvia joins the Eurozone at a moment when its future and its solidity are still debated. While, at the moment, a dismantlement of the single currency is less and less probable, the Euro nevertheless has to give some guarantees regarding its viability and credibility. The credibility may only exist by the creation of a genuine European (or Eurozone) economic government but also by the respect of the engagements made by the other Member States (with the exception of Denmark and United Kingdom) to adopt the Euro in a near future.

Gilles Johnson

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