Wednesday, March 6, 2013
The Latvian government has formally requested the European Union (EU) Commission to assess its readiness to join the euro as of January 1, 2014. Latvia's economy suffered badly during the recent recession, but it has now recovered to the point where it has the highest GDP growth rate (5.5% in 2012) and the second highest export rate in the EU. Its budget deficit was 1.5 percent of its gross domestic product in 2012 and is predicted to fall further. If Latvia is accepted into the eurozone, it will become the 18th member state.
The economic picture is not entirely rosy, however. Latvia's GDP shrank by approximately 20% between 2008 and 2010 and still has not recovered to pre-recession levels. While the unemployment rate has fallen from a high of 20% during the recession, it remains high at 14%. There is significant internal opposition to joining the Euro as well. According to news reports, as much as two-thirds of the population is opposed to adopting the euro due to concerns about higher prices and less local control over the economy. While Latvia is not required to hold a public referendum on the issue, the level of public support is a factor taken into consideration in assessing the bid.
The EU Commission and the European Central Bank are expected to publish a report on Latvia's readiness to join the euro in June. A decision could come as early as July.