Latvia joins Eurozone with New Year’s fanfare but little joy

Latvia became the 18th country to make the European Union’s euro its currency when fireworks exploded over Riga and church bells tolled in the new year.

Latvia has posted the 28-nation EU’s most impressive economic growth rates for the last two years, after self-imposed austerity measures of a severity that helped the tiny Baltic state recover from recession faster than most of the bloc’s more established members.

European leaders praised Latvia’s vibrant economic performance, hailing its entrance into the Eurozone as evidence of the common currency’s enduring appeal despite a rash of bailouts and banking crises in recent years.

“This is a major event, not only for Latvia, but for the euro area itself, which remains stable, attractive and open to new members,” European Commission President Jose Manuel Barroso said in welcoming the new euro-holders.

“For Latvia, it is the result of impressive efforts and the unwavering determination of the authorities and the Latvian people,” he added. “Thanks to these efforts, undertaken in the aftermath of a deep economic crisis, Latvia will enter the euro area stronger than ever, sending an encouraging message to other countries undergoing a difficult economic adjustment.”

Prime Minister Valdis Dombrovskis, who resigned in November after a deadly supermarket collapse in Riga, the capital, but who remains in office pending a replacement, was keen to show his support for the new currency by ceremonially withdrawing his country’s first colorful euro notes from an ATM shortly after midnight.

But it was with considerable trepidation that most Latvians began surrendering their lats for a currency that just a year ago was threatened with mounting debt crises among its members and fears that some, Greece first among them, might have to exit the Eurozone.

In survey results published last month by Latvian opinion research firm SKDS, only 20% of 1,000 respondents expressed support for adopting the euro. And 58% said they opposed the currency swap, the third in Latvia since it declared independence from the Soviet Union in 1991, first replacing the Soviet ruble with a Latvian one in 1992, then reverting to a new version of its pre-Soviet lats a year later.

SKDS chief Arnis Kaktins said he expected public support for the euro to grow if consumer fears of rising prices and shared burdens from less disciplined euro countries failed to materialize, Agence France-Presse reported. Kaktins also observed that Latvians were typically more conservative on money issues at the start of winter, when they worry about the impact of heating fuel costs on the family budget.

With the addition of Latvia’s population of 2 million, the Eurozone now encompasses 333 million people.

The Latvian economy expanded by 5% a year in 2011 and 2012, the best economic performance in the EU, which was collectively mired in recession until this year and grew by only 0.2% in the quarter ending in September.

Twitter: @cjwilliamslat

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