Latvia to seek euro readiness view next year

By Aleks Tapinsh
RIGA, Fri Nov 2, 2012 2:34pm GMT

(Reuters) – Latvia intends to ask European authorities early next year about whether it can adopt the euro in 2014, the country’s finance minister told Reuters on Friday.

The Baltic state endured deep austerity during the global crisis in 2008-2010 in order to keep its lat currency pegged to the euro. It says it still sees euro zone membership as offering greater stability than keeping its own currency, despite the bloc’s 3-year-old sovereign debt crisis.

Finance Minister Andris Vilks said the country would seek the opinion it needs on its readiness to adopt the euro from the European Commission and the European Central Bank next year.

“It seems to be January or February at the latest,” he said. “The decision should come late June or early July,” he added, referring to when EU governments would decide whether Latvia can join the bloc in 2014.

Latvia aims to follow northernmost Baltic state Estonia, which adopted the euro in 2011 despite ECB worries about the country’s inflation levels.

In a taste of what Latvia might expect, European Central Bank policy maker Erkii Liikanen said it was not enough for Latvia to meet the various economic criteria to adopt the euro.

“Long-term sustainability and institutions would be the focus now,” Liikanen said at a Latvian central bank conference.

The quality of institutions, which normally refers to a country’s legal and political framework, was very important in the euro zone, which was something Finland also found when it adopted the currency, Liikanen said.

Latvia is confident it has met all the criteria – on deficits, debt and currency stability – to qualify for the euro. Vilks also saw no reason to doubt Latvia on other counts.

“Our experience and our existing work should diminish any kind of speculation about sustainability,” he told Reuters when asked about Liikanen’s comments.

“If you are go through such a very deep crisis, like a war, you cannot simply forget such important consequences and what caused those imbalances,” he added.

Latvia’s economy shrank by a quarter in 2008-2010, including an 18 percent drop in 2009 alone.

At the conference, Vilks was upbeat about future budgets, saying the 2013 deficit could come in under the current target of 1.4 percent of output. “It is possible in 2015 to get a balanced budget, even a surplus,” he added.

(Reporting by Aleks Tapinsh, Writing by Patrick Lannin; Editing by Ruth Pitchford)