On Monday, March 4, Prime Minister Valdis Dombrovskis, Minister of Finance Andris Vilks and President of the Bank of Latvia Ilmārs Rimšēvics signed a letter requesting the extraordinary Convergence Report to the European Commission (EC) and the European Central Bank (ECB) in order to assess the readiness of Latvia to the membership in the eurozone.
„Latvia currently fulfils the Maastricht criteria with certainty; therefore this is the most appropriate moment to ask the EC and the ECB to assess our conformity to the membership in the Eurozone,” Minister of Finance Andris Vilks explained.
He emphasizes that the fulfilment of the criteria is a mark of quality testifying that the Latvian economy is able to provide sustainable growth - an essential precondition to increase the attractiveness of Latvia’s economic environment to foreign investors.
“The decision of the day to request the Convergence Report is a significant step in the long chain of processes for the introduction of euro in Latvia from 1 January 2014,” Vilks added.
Request for the Convergence Report is a step towards Latvia’s accession to the eurozone. If the opinion of the EC and the ECB experts is favourable to Latvia, the final political decision on invitation of Latvia to access the eurozone will be made by the Council of Europe in July this year.
„Latvia’s determination in overcoming the crisis and the stable ground for sustainable development, which we have created by means of responsible policy, currently provides a real opportunity for Latvia to access Europe’s single currency, becoming the 18th Member State of the Eurozone in 2014. I am convinced that this step will not only strengthen Latvia’s reputation and accelerate the economic development of our country but will also demonstrate the anew increasing capacity of the eurozone,” noted Prime Minister Valdis Dombrovskis.
Maastricht criteria define that the country’s budget deficit shall not exceed 3% from gross domestic product (GDP), government’s overall debt shall not exceed 60% form GDP, rate of inflation shall not exceed more than 1,5 percentage points than the average indices in three EU countries with the lowest inflation and the long-term interest rates of state securities shall not exceed more than two percentage points than the average index of the long-term interest rates of three EU countries with the lowest inflation.
From the viewpoint of European authorities not only a state’s conformity to the Maastricht criteria is assessed but also the ability to ensure sustainable economic development. Latvia ensures the fulfilment of a sustainability criterion through a low level of debt, strengthening of responsible fiscal policy in legislation and improvements of normative acts made for the prevention of new economic bubbles. These conditions will be further strengthened after Latvia’s accession to the eurozone, the legal order of which decreases the risk that a country could refuse to implement responsible fiscal policy.
Currently Latvia is the only non-member State of the eurozone, which qualifies for the membership in the eurozone from 1 January 2014. The progress achieved is the result of the interaction of several factors: the result of a fiscal and economic strategy implemented by the government, correcting political deficiencies made in the previous years and building confidence that Latvia is a trustworthy collaboration partner. It the same time the ability of businessmen to adapt to new economic circumstances and restore competitiveness in an international arena also should be emphasized, resulting in the fact that currently Latvia has the most rapidly growing economy in the European Union.