The document on the intention to introduce the euro from January 1, 2014 was signed in Riga by Latvian Prime Minister Valdis Dombrovskis, Finance Minister Andris Vilks, and central bank governor Ilmars Rimsevics. However, this letter does not mean that Latvia will be automatically admitted to the eurozone: it is merely a kind of 'starting' statement, followed by a fairly lengthy and complex procedure for joining the European monetary community.
The letter to the European Commission and the ECB is traditionally framed as a request to prepare a report on the country's compliance with the so-called 'Maastricht criteria,' mandatory for eurozone members. Even if the conclusions of this report are positive and contain recommendations for Latvia's admission to the European monetary community, at subsequent stages the candidate country needs to secure support from existing eurozone members – first at the level of finance ministers, then at the level of EU heads of government and state. At the final stage, the European Central Bank must give its consent.
However, the prospects for Latvia's admission to the eurozone look very encouraging: through its actions during the exit from the recent economic downturn, the country's government proved that it can successfully act as a crisis manager and solve serious financial problems. The preparation for replacing the national currency with the single European currency has passed all necessary stages: the relevant law was adopted by the Saeima (parliament) of Latvia at the end of January this year, and in February it was approved by the country's President Andris Berzins.
The specific mechanism for transitioning to the euro is as follows: from January 1, 2014, the European currency will circulate alongside the lat, which will gradually be 'phased out' of circulation. After two weeks, payments will only be possible in euro, but for several more months sellers will have to display prices also in lats. Local residents already have sufficient experience in transitioning to new currencies: in 1992, they switched without particular difficulty from the Soviet ruble to the temporary Latvian ruble, and a year later to the full-fledged lat.
True, it is not entirely clear how ordinary citizens feel about the European currency: the authorities virtually ignored proposals to hold a nationwide referendum on the transition to the euro. Valdis Dombrovskis, for example, believes that the people already expressed their opinion in 2003 by voting for Latvia's accession to the EU. However, this is not the same thing: after all, not all EU states (there are 27) are members of the eurozone (there are currently 17). Moreover, some of them (for instance, Great Britain) have no intention of adopting the euro on principle. And for Denmark, which kept its krone, the results of the popular vote were at the time simply shocking – there was probably not a single resident in the country who doubted that the state would not adopt the euro. So it would be quite appropriate to ask the opinion of the Latvian people, since the local currency enjoys deserved respect in the financial world.
The lat is solid not only in appearance: it is currently the 'heaviest' currency in Europe, with an exchange rate of almost two dollars. But the main thing is not so much its absolute value as its stability. The lat was initially created as a large denomination in anticipation of possible inflation, yet over 20 years (it celebrated its anniversary on March 5) it has managed to maintain its original 'size'. So the residents of Latvia have every reason to be proud of their national currency and to fear the transition to the euro. It is not excluded that this could lead to price increases, which, for example, in Germany at the time turned out to be almost twofold.
Finance Minister Andris Vilks calls the decision to adopt the euro historic, believing that joining the eurozone will give the country's economy additional impetus. And this is believed not only in Latvia, despite the crisis and debates about the single currency: Estonia already adopted the euro in 2011, and Lithuania plans to do so in 2015.
Incidentally, the rating agency Fitch noted that all three Baltic countries emerged surprisingly quickly from the crisis of 2008-2009, and over the past two years have had the highest economic growth rate in the EU. True, the price for these successes, as always, is paid by ordinary people, for whom the recipe for the country's exit from any crisis is always the same – tightening their belts.