RIGA, Latvia – The former Soviet republic of Latvia began the new year by joining the Eurozone as its 18th member as people began swapping their old currency — lats — in exchange for euros.
Fireworks exploded over Riga and church bells tolled in the new year as the tiny Baltic country joined the group of EU states which uses the euro as its currency.
Latvia had recently emerged from the financial crisis to become the EU’s fastest-growing economy.
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, writes LA Times.
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.
Prime Minister Valdis Dombrovskis ceremonially withdrew his country’s first colorful euro notes from an ATM shortly after midnight.
“It’s a big opportunity for Latvia’s economic development becoming a member of the world’s second biggest currency,” Dombrovskis said.
After joining NATO and the European Union in 2004, entering the eurozone was seen as a natural step for Latvia’s political leadership, deepening the Western integration they have sought since Latvia and its Baltic neighbors, Estonia and Lithuania, broke away from the Soviet Union in the early 1990s.
“Joining the euro marks the completion of Latvia’s journey back to the political and economic heart of our continent, and that is something for all of us to celebrate,” said Olli Rehn, the EU commissioner in charge of economic and monetary affairs.
But most Latvians began surrendering with trepidation their lats for a currency that just a year ago was threatened with mounting debt crises among its members.
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.
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.
Latvia, with its large ethnic Russian minority, is often seen as having closer economic ties to Russia than its fellow Baltic states Lithuania and Estonia. Russia remains an important export market while its banking system attracts substantial deposits from clients in other ex-Soviet states.
Estonia joined the eurozone in 2011 and Lithuania aims to become a member in 2015. That would complete the Baltic countries’ efforts to link up economically, politically and militarily with the West while moving away from Russia’s sphere of influence.