Brussels, 5 June 2013
Commission concludes that Latvia is ready to adopt euro in 2014
Today, the European Commission publishes its 2013 Convergence Report on Latvia, together with a citizen's summary that briefly explains the report and the rationale behind it. The Commission concludes that Latvia has achieved a high degree of sustainable economic convergence with the euro area and proposes that the Council decide on Latvia’s adoption of the euro as from 1 January 2014.
Olli Rehn, Commission Vice-
He added: "Latvia's desire to adopt the euro is a sign of confidence in our common currency and further evidence that those who predicted the disintegration of the euro area were wrong.”
The Convergence Report concludes a positive assessment of Latvia's economic performance against the convergence criteria set out in the EU Treaty as follows:
The average inflation rate in Latvia in the 12 months to April 2013 was 1.3%, well below the reference value of 2.7%, and it is likely to remain below the reference value in the period ahead. While short-
Public finances (deficit and debt)
The general government deficit-
Latvia’s average long-
The Latvian lats has participated in the Exchange Rate Mechanism (ERM II) since 2 May 2005, which is considerably more than the minimum two years. When it joined ERM II, the Latvian authorities committed to keep the lats within a ±1% fluctuation margin around the central rate. During the two years preceding this assessment, the lats exchange rate did not deviate from its central rate by more than ±1% and it did not experience tensions.
Other factors have also been examined, including balance of payments developments and integration of labour, product and financial markets. Latvia's external balance adjusted significantly during the crisis, supported also by improvements in its external competitiveness. Latvia's economy is well integrated within the EU economy through trade and labour market linkages, and it attracts sizeable levels of foreign direct investment. The integration of the domestic financial sector into the EU financial system is substantial, mainly due to a high level of foreign ownership of the banking system.
Finally, Latvia's legislation in the monetary field is compatible with EU legislation.
This assessment is completed by the European Central Bank's (ECB) own convergence report, also published today.
Throughout the crisis, Latvia has successfully managed a difficult macro-
According to the EU Treaty, the Commission and the ECB report every two years or upon request by a Member State with a derogation on the subject. On 5 March this year, Latvia formally asked the Commission to deliver an extraordinary convergence report with the aim of joining the euro from 1 January 2014.
The conditions for euro adoption consist of four stability-
According to the Treaty, additional factors also have to be taken into account in the assessment (balance of payments, market integration) as indicators that the integration of a Member State into the euro area will go ahead without problems and to broaden the view on the sustainability of convergence.
ECOFIN Council will take the final decision on the adoption of the euro in Latvia in July, after the European Parliament has given its opinion, euro area Finance Ministers have given a recommendation and EU leaders have discussed the subject at the European Council meeting on 27-
The procedure will be fully completed once the Council of Ministers, acting by unanimity of its euro area Member States and Latvia, has irrevocably fixed the exchange rate of the lats to the euro.