By Judith Ugwumadu | 2 January 2014
Latvia became the latest European Union member state to adopt the euro on January 1, taking the number of countries in the single currency to 18.
As a result of the switch from the national Lats currency, Latvijas Banka – the national central bank of Latvia – has also became a member of the Eurosystem after it paid the remainder of its contribution to the capital of the European Central Bank. The requirement was for Latvijas Banka to pay a minimal percentage of their subscribed capital, currently 3.75%, as a contribution towards the ECB’s operational costs.
ECB president Mario Draghi said Latvia earned its position in economic and monetary union.
On Wednesday the euro started to gradually replace the lats as the currency of Latvia. The Bank of Latvia will change unlimited amounts of lats into euro at the official conversion rate (1 euro = 0.702804 lats) for an unlimited period of time. There will be a dual circulation period of two weeks, during which the two currencies will circulate alongside each other in order to allow for a progressive withdrawal of lats. When retailers receive a payment in lats, change will be given in euro, said the ECB.
Speaking on December 31, European Commission president José Manuel Barroso said he was delighted to welcome Latvia to the euro area, which comes after the economic crisis that cast doubt over the currency’s future.
‘This is a major event, not only for Latvia, but for the euro area itself, which remains stable, attractive and open to new members,’ Barroso said.
‘For Latvia, it is the result of impressive efforts and the unwavering determination of the authorities and the Latvian people. 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.’
On June 5, the European Commission concluded that Latvia met the criteria for adopting the euro. Then July 9, the EU Finance Ministers took the formal decision to admit the country to the single currency.
Latvia joined the EU in 2004 and under EU treaties all new members must adopt the euro eventually although it can take years to meet the tough requirements. The remaining Baltic EU member, Lithuania, is hoping to follow in January 2015. It would be the last Baltic country to adopt the euro after Estonia made the switch in 2011.
