Latvia has been an EU member state since 1 May 2004, and as such also a member of the Economic and Monetary Union. Its currency, the Latvian lats, was pegged to the euro when it joined the ERM II on 2 May 2005, and since then has floated within 1% of the central rate: Ls 0.702804 = €1. Latvia had originally planned to adopt the euro on 1 January 2008, but for various reasons this was subsequently delayed several times.[1][2] After being elected in 2011, Latvian President Andris Bērziņš announced the official goal was for Latvia to join the eurozone in 2014: "Personally I'm very optimistic we'll join the euro on 1 January 2014. It's our goal and we are working hard to implement this process."[3] In September 2012, the official target for a euro adoption of January 2014 was again confirmed, with Latvian Prime Minister Valdis Dombrovskis saying: "Latvia is on track for 2014 and permission to join would be sought in 2013."[4][5]
Some parliamentarians in Latvia have pushed for a referendum on euro adoption,[6] but Latvian Prime Minister Valdis Dombrovskis has argued that a referendum is unnecessary because Latvians already voted in favour of their EU accession treaty in 2003 which binds them to adopt the euro as soon as the country is found to comply with all euro convergence criteria, and also argued that a referendum – no matter the outcome – would stall preparations for the changeover and thus delay euro adoption.[7] According to Latvian law, if more than 1/3 of the MPs object to a bill, and propose an alternative bill, within two weeks of the original bill being passed by parliament, a referendum can be called to allow the public to decide between the two bills. On 4 February 2013, shortly after the Latvian parliament passed its "euro adoption bill" on 31 January, the biggest opposition party Harmony Center stated that they would not support the counter proposed "referendum bill" tabled by the other opposition party Union of Greens and Farmers.[8] On 9 February it was announced the referendum proposal had only gathered the support of 4 out of 100 MPs. These MPs stated that they would instead attempt to collect the minimum 30,000 electoral signatories required to put the measure to a referendum, which was the last remaining option they had to force a referendum on the issue.[9] Latvia officially applied for euro adoption on 4 March 2013.[10] The Central Election Commission rejected the proposed referendum on 18 March, as the proposed bill did not comply with the Latvian constitution and was inconsistent with Latvia's international obligations.[11]
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[edit] Roadmap for euro adoption
A draft law was presented by the governments cabinet on 6 November 2012, which outlined four key regulations for the introduction of the euro: 1) ATM's will stop distributing lats from 1 January 2014, 2) Both Lats and Euros will be in circulation for two weeks, 3) Post offices will offer free exchange for a month (later being extended to three months in the final version of the law[12]), 4) All shops must have dual price displays for three months before until six months after the adoption.[13] The law was given final approval vote on 31 January 2013.[14][15] For Latvia to adopt the euro in 2014, they will need to comply with all five convergence criteria. The Latvian finance minister announced in December 2012 that they planned to request a convergence compliance check in February 2013.[16] However, in January 2013 Dombrovskis stated that for "technical reasons" the formal request had been delayed until March, but that Latvia "are currently fulfilling the Maastricht [euro adoption] criteria with a considerable reserve, therefore I don't see any basis on which this convergence report would be negative."[15] At the beginning of March, the Latvian government formally applied for entrance to the eurozone.[17] The convergence report is expected to be published by early June,[17] which would allow the Economic and Financial Affairs Council of the EU to make a decision on their application in July.[10] Under this timeline, the convergence evaluation of interest rates and inflation values will be conducted as per the measured annual average on 28 February 2013.[18][19][20]
[edit] Convergence Status
The Maastricht Treaty originally required that all members of the European Union join the euro once certain economic criteria are met. In April 2012, when Latvia last time was officially evaluated by ECB, it met 3 out of the 5 criteria. Latvia has announced that they will request that another evaluation be conducted in March 2013.[15] Latvian Prime Minister Valdis Dombrovskis stated in January 2013 that Latvia "are currently fulfilling the Maastricht [euro adoption] criteria with a considerable reserve, therefore I don't see any basis on which this convergence report would be negative."[15]
| Convergence criteria | ||||||
|---|---|---|---|---|---|---|
| Assessment month | Country | HICP inflation rate[21] (12-months average of annual rates)[nb 1] |
Budget deficit to GDP | Debt-to-GDP ratio | ERM II member[22] | Long-term interest rate[23] (12-months average of 10yr bond yields)[nb 2] |
| 2012 ECB Report | Reference values[nb 3] | max. 3.1% (as of 31 Mar 2012) |
max. 3.0% (Fiscal year 2011)[25] |
max. 60%, or declining (Fiscal year 2011)[25] |
min. 2 years (as of 31 Mar 2012) |
max. 5.80% (as of 31 Mar 2012) |
 Latvia |
4.1% | 3.5% | 42.6% | 2 May 2005 | 5.77% | |
| April 2013 | Reference values | max. 2.5%[nb 4][nb 5] (as of 31 Mar 2013) |
max. 3.0% (Fiscal year 2012)[27] |
max. 60%, or declining (Fiscal year 2012)[28] |
min. 2 years (as of 31 Mar 2013) |
max. 4.81%[nb 4][nb 6] (as of 31 Mar 2013) |
| Latvia |
1.6% | 1.2% | 40.7% | 2 May 2005 | 4.00% | |
- Notes
- ^ The 12-months average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
- ^ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
- ^ Reference values from the ECB convergence report of May 2012.[24]
- ^ a b The reference values for HICP inflation and long-term interest rates are calculated based on the "calculation principle" outlined in the 2012 ECB Convergence Report,[26] with the input of forecasted data for the sliding assessment year 1 April 2012 - 31 March 2013.
- ^ The 3 best performing countries in regards to HICP inflation were Greece (0.614%), Sweden (0.843%) and Latvia (1.567%), with no outliers detected.
- ^ As Greece is still part of a bailout program, and suffered from elevated interest rates significantly above the eurozone average (being 15.40% above), this country was excluded from the calculation of the reference limit for "long term interest rates", leaving just Sweden (av. rate=1.61%) and Latvia (av. rate=4.00%) as benchmark countries for the calculation of the reference value limit.
[edit] Proposed Latvian euro design
The design of Latvian euro coins features three separate designs.[31] The design of the national side was publicised in July 2006 on the home page of the National Bank of Latvia. The designs featured were the Latvian maiden, which was featured on the 5 lats coin prior to World War II, on the 1 and 2 euro coins, the greater Coat of arms of Latvia on the 10, 20 and 50-cent coins, and the lesser Coat of arms of Latvia on the 1, 2 and 5-cent coins. Originally, it was planned that Freedom Monument would be featured on the 2 euro coin, but the original design did not meet the regulations of the European Central Bank since it reached out into the ring of the coin and changed one of the stars. Latvia decided that a changed design of the monument would not be as recognisable and decided to use the Latvian maiden, used on the 1 euro coin, on the 2 euro coin as well.[32]
The Latvian Parliament adopted on 26 July 2005 "Regulation Nr.564", outlining that the official Latvian name of the euro currency would be "eiro". In December 2007 the regulation was amended, so that the name in all legal matters would be "euro" and in all non-legal matters "eiro". The ECB was asked to approve this special naming convention, but declined on 13 November 2012 and asked Latvia to repeal either the entire regulation or at least the paragraph that granted the euro currency a special Latvian name.[33] On 4 March 2013, the Latvian Ministry of Justice clarified that while the official name of the currency for all financial and legal documents shall be "euro", the public will continue to be able to use the Latvian name "eiro".[34] For the design of images on the common side and a detailed description of the coins, see euro coins. These designs must be regarded as pattern pieces: they have no official status or sanction.
| €0.01 | €0.02 | €0.05 |
|---|---|---|
 |
|
|
| Lesser coat of arms of Latvia | ||
| €0.10 | €0.20 | €0.50 |
 |
|
|
| Greater coat of arms of Latvia | ||
| €1.00 | €2.00 | €2 Coin Edge |
 |
 |
DIEVS* * * SVĒTĪ* * * LATVIJU* * *[32] |
| Latvian maiden | ||
A tender for minting the Latvian euro coins began on 20 September 2012.[35][36] On 10 December 2012, it was announced that Latvia will utilise the Stuttgart Mint.[37]
[edit] See also
[edit] References
- ^ "Don’t look for the Euro until after 2012". New Europe. 18 August 2007. Archived from the original on 23 December 2007. Retrieved 27 December 2007.
- ^ "Bank targets 2013 as Latvia's ‘E-day’". baltictimes.com. 26 October 2007. Retrieved 28 October 2007.
- ^ Pop, Valentina (15 September 2011). "Latvia aiming to join eurozone in 2014". EU Observer. Retrieved 15 September 2011.
- ^ Latvia still keen to join single currency despite euro crisis, Guardian 19 September 2012
- ^ "Latvia on track to join euro in 2014, says PM". EU Observer. 22 October 2012. Retrieved 22 October 2012.
- ^ Duxbury, Charles (28 February 2013). "Lithuania's New Leader Says Nation Wants Euro". Wall Street Journal. Retrieved 2013-03-03. "However, some Latvian lawmakers recently sought a referendum on that country's move"
- ^ "If opposition initiates referendum on euro, Latvia will fall behind euro introduction timetable". 10 December 2012. Retrieved 2013-03-03.
- ^ "Latvia's Biggest Opposition Party Won’t Seek Referendum on Euro". Bloomberg. 4 February 2013. Retrieved 6 March 2013.
- ^ "Four members calls for the suspension of the Euro Law, however, the President will enact the law" (in Latvian). Delfi.lv. 8 February 2013. Retrieved 6 March 2013.
- ^ a b "Latvia formally applies for eurozone membership". Euractiv.com. 4.March 2013. Retrieved 4.March 2013.
- ^ "CEC decided not to register the proposed referendum bill about the introduction of the euro" (in Latvian). Delfi.lv. 18 March 2013. Retrieved 18 March 2013.
- ^ "Saeima adopted the euro Law". Saeima. 31 January 2013. Retrieved 16 February 2013.
- ^ "Latvia on Road to Adopt Euro in 2014". Sofia News Agency. 7 November 2012. Retrieved 7 November 2012.
- ^ "Introduction of the euro Law (No: 459/Lp11)". Saeima. 16 November 2012. Retrieved 30 November 2012.
- ^ a b c d "Latvian parliament paves way to euro switch". EurActiv. 1 February 2013. Retrieved 2013-02-03.
- ^ "INTERVIEW: Latvia to apply to join euro zone in February 2013". Reuters Middle East. 18 December 2012. Retrieved 24 January 2013.
- ^ a b "Latvia and the euro". European Commission. 2013-03-05. Retrieved 2013-03-31.
- ^ a b "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012.
- ^ a b "Progress towards convergence – Nov. 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 22 November 2012.
- ^ "Convergence Report (May 2012)" (PDF). ECB. May 2012. Retrieved 18 November 2012.
- ^ "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012.
- ^ "What is ERM II?". European Commission. 31 July 2012. Retrieved 8 September 2012.
- ^ "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012.
- ^ "Convergence Report May 2012". European Central Bank. May 2012. Retrieved 2013-01-20.
- ^ a b "European economic forecast - spring 2012" (PDF). European Commission. 1 May 2012. Retrieved 1 September 2012.
- ^ "Convergence report 2012". European Central Bank. May 2012. Retrieved 2013-01-15.
- ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013.
- ^ "Government debt data". Eurostat. 22 April 2013. Retrieved 22 April 2013.
- ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012.
- ^ "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 17 March 2013.
- ^ "The Origins of Euro Coins: Latvia". National Bank of Latvia. Retrieved 2008-07-12.
- ^ a b "Latvian Euro Coins". eiro.lv. Retrieved 2013-01-25.
- ^ "OPINION OF THE EUROPEAN CENTRAL BANK: On the spelling of the single currency (CON/2012/87)" (PDF). ECB. 13 November 2012. Retrieved 6 March 2013.
- ^ "Society and public space will continue to be able to use the word "eiro"" (in Latvian). Latvian Ministry of Justice. 4 March 2013. Retrieved 6 March 2013.
- ^ "Bank of Latvia Announces Tender to Mint Euro Coins for Latvia". Latvia Today. 27 September 2012. Retrieved 27 October 2012.
- ^ "Tender Regulation: On the Potential Production, Packaging and Delivery of the Latvian Euro Circulation Coins (Amended by Resolution of Minutes no.3 meeting)" (PDF). Bank of Latvia. 20 November 2012. Retrieved 30 November 2012.
- ^ "Latvian euro coins Kal Germany for 5.306 million" (in Latvian). FinanceNet. 10 December 2012. Retrieved 21 December 2012.
[edit] External links
- Eiro.lv – the euro changeover site (Ministry of Finance of Latvia)
- Bank of Latvia
- The Euro Information Website – Latvia
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