Latvia steps out of austerity and into the Euro

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latvia_euroAt midnight (2200 GMT), on Wednesday, the Baltic country of Latvia with a population of just 2 million took one step closer to Europe and one step further from the reach of Russia by adopting the Euro as its currency. Latvia’s acting Prime Minister, Valdis Dombrovskis, said it is an opportunity as he withdrew the first Euro banknote from a cash machine in Riga. The country’s economy shrank by a quarter during 2008-2010, but then came back to be the Euro zones fastest growing economy increasing by 5.6 percent in 2012 after its government pushed some of the toughest austerity measures in Europe. The European Central Bank has warned Latvia that the high level of foreign deposits, mostly from Russia, in Latvian banks, as in Cyprus, was a risk factor. Neighboring Estonia joined the euro zone in 2011, and Lithuania aims to do so in 2015. After Malta, Estonia and Cyprus, Latvia is the smallest economy in the euro zone and they are expecting the new currency to encourage investors. The credit rating has already been increased in anticipation of the move into the Euro.