Latvia on course to adopt euro in 2014: government

Latvia insisted on Friday that it was on course to join the eurozone in 2014, waving aside concerns about the stability of its economy which has swung from boom to bust and back to growth.

"I see Latvia's future in the eurozone," Prime Minister Valdis Dombrovskis told a conference in Riga organised by the Latvian central bank.

"In one word, the eurozone means stability and growth," he added.

Unfazed by the eurozone crisis, the Baltic state has kept its national currency, the lats, pegged to the euro and argues that it makes sense to join the troubled monetary bloc because its main trade partners are already members.

The centre-right government has targeted January 1, 2014 for Latvia to become the eurozone's 18th member and insists that the country's figures already meet all the Maastricht criteria governing euro adoption.

The criteria, set down in the 1992 Maastricht Treaty that created European economic and monetary union, include limits on a country's deficit, debt and inflation.

They have been breached by many of the countries currently using the euro -- though internal policing has been beefed up -- and in any case are a hurdle for would-be members.

The only remaining obstacle appears to be whether Latvia's economy -- marked in the last decade by extreme swings between growth and recession -- is now deemed to be on a "sustainable" path.

To enter the eurozone, Latvia requires a green light from the European Central Bank and the European Commission, which is the executive body of the full, 27-nation European Union. A decision is expected in the first half of 2013.

The former Soviet-ruled republic of two million has been hailed by organisations such as the International Monetary Fund as an example of how to use austerity to build a recovery, after its completion in December 2011 of a three-year, 7.5-billion-euro ($10 billion) international loan programme.

The rescue plan came as Latvia tumbled into the world's deepest recession during the global crisis, with its economy shrinking by a cumulative 25 percent in 2008-2009.

The slump came in the wake of breakneck growth fuelled by easy credit and fast-rising wages after Latvia joined the EU in 2004.

The austerity measures applied by Dombrovskis's government have gone far beyond those deployed in Western European nations.

Growth returned last year, clocking 5.5 percent, and a similar figure is expected this year, making Latvia the fastest-expanding economy in the EU.

Eurozone membership has also been a key goal for ex-Soviet Baltic neighbours Estonia, which joined in 2011, and Lithuania, aiming for 2015.

Asked by AFP if Latvia expected to be admitted in 2014, Finance Minister Andris Vilks replied: "Of course."

He said: "Sustainability is the only question that can be raised. September was the first month we met all the Maastricht criteria."

Vilks said: "We understand how important it is to be in the eurozone. We are able to show sustainability and that is the key issue, to keep sustainability and even speed up reforms to increase sustainability."

Having told Friday's conference that Latvia could move from a deficit to a balanced budget in 2015, Vilks told AFP that could occur even sooner.

"I won't be surprised to see us coming fast to a surplus budget. It could even happen during 2014, the trend is so positive. The primary balance should be close to zero already by 2014," he said.

Eurozone members are required to keep their public deficit -- the gap between revenue and spending by all arms of the state -- below 3.0 percent of gross domestic product.

Latvia's was slashed from 9.7 percent in 2009 to 3.5 percent in 2011, and the 2012 target is 1.9 percent.

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