03 July 2013

EP gives go-ahead for Latvia to join the euro

Latvia should join the euro on 1 January 2014, recommends the EP in a resolution voted on Wednesday. This vote is in line with a European Commission recommendation and political backing from EU HOSG at the latest EU Council summit. (Includes statements from President Schulz and EPP Group.)

"Latvia has made huge efforts to overcome the economic and financial crisis and I'm pleased to welcome it to the Eurozone from 1 January 2014", said Burkhard Balz (EPP, DE), who authored Parliament's recommendation.

Parliament's recommendation was passed by 613 votes to 67 with 29 abstentions. In it MEPs praise the people of Latvia for their "extraordinary efforts to overcome the financial crisis". However, the opinion also warns Latvia that it must maintain the pace of reform, strengthen its national economic governance structures and reduce its shadow economy.

The Latvian government needs to do more to remedy structural deficiencies in the labour market and to reduce poverty and growing income inequality, say MEPs. It should also do more to ensure that Latvian banks are sound, in particular by stepping up supervision of banks active in the non-resident deposit business, they add.

Finally, the opinion notes that Latvia's price stability is "very dependent" on commodity prices, particularly of energy. This problem is compounded by the fact that Latvia imports much of its energy needs from a single source and an effort should be made to remedy this, the text adds.

Next steps

The European Parliament plays a consultative role in scrutinising the fitness of prospective Eurozone countries. A final go-ahead is expected from EU finance ministers meeting on 9 July.

Press release

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European Parliament President Martin Schulz made the following statement after the house approved a report on Latvia's readiness to join the eurozone.

"I welcome the European Parliament's assessment that Latvia is ready for the euro. Joining the eurozone will be a milestone in Latvia's history and a confirmation of the eurozone's strength. It will bring Latvians many benefits if the authorities pursue right policies.

I congratulate Latvia for successful efforts to meet the euro eligibility criteria at a time when the government had to manage the economic crisis that hit its people so hard. In many respects, Latvia can be seen a courageous example for euro zone countries in difficulties.

Euro area membership brings clear benefits for countries if their economic policies are sound. It eliminates exchange rate risks, allowing savings on currency exchanges, lowers transaction costs, offers more favourable financing conditions for businesses and better price transparency for consumers. It opens the doors to a wide, integrated economic area and brings the full advantage of the European Single Market to the economy.

The EP's report rightly reminded that Latvia still faces challenges, such as fighting unemployment and narrowing the income gap, avoiding boom and bust cycles, strictly supervising banks and communicating actively with citizens about the advantages and the practical aspects of the euro adoption."

Press release

See also 

A “yes” from Brussels will help boost support for euro in Latvia - Burkhard Balz, 4.7.13

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Green light for Latvia's membership of the eurozone

"Latvia has overcome the 2008 crisis by working very hard, painfully, but in the end successfully, on its budget consolidation. The country is now ready to join the euro in an exemplary manner. Public debt is currently at 40 percent of GDP which is amongst the best figures in the EU", said Burkhard Balz MEP.

“Latvia did not 'waste' the financial crisis. Instead, it used the opportunity to implement fundamental reforms in its economy, which are now bearing the fruit of sound economic growth. One of the side effects of reforms is a stable and sustainable macroeconomic environment which provides the opportunity to join the Eurozone", added Latvian MEP Krišjānis Kariņš.

EPP-Group press release

© European Parliament