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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Press Speaking Points on the adoption Latvia's Convergence Report
Press Conference, Brussels
5 June 2013
This press conference is about a very important subject: Latvia's application to become member of the euro and the eurozone. I send my greetings to the journalists gathered in Riga “Latvia, 12 points" is my message today to Riga, to Latvia!
The Commission has today adopted its Convergence Report on Latvia, prepared at the request of the Latvian government.
I am glad to announce that we have concluded that Latvia is ready to adopt the euro on 1 January 2014, having achieved a high degree of sustainable economic convergence with the euro area. The Commission is now making a proposal to the Council to this effect. I expect the Council, Eurogroup, European Council and European Parliament will discuss the matter and this could possibly be decided in the ECOFIN Council in July.
Latvia’s experience shows that a country can successfully overcome macroeconomic imbalances, however severe, and emerge stronger out of the crisis with a solid recovery. In response to the crisis of 2008-9, Latvia took decisive policy action, supported by European solidarity and the EU-IMF-led financial assistance programme, which improved the flexibility and adjustment capacity of the Latvian economy. And this has paid off: Latvia is now forecast to be the fastest-growing economy in the European Union this year.
Furthermore, Latvia's desire and will to adopt the euro is a sign of confidence in our common currency. It is further evidence that those who predicted a disintegration of the euro, were indeed behind the curb, and simply wrong.
We have examined Latvia thoroughly but fairly, full respecting the principle of equal treatment, very fundamental to EU. Latvia’s ability to grow and prosper in a sustainable manner once it joins the euro area has been an essential element and integral part of our assessment. Let me explain this in some detail briefly. There are both quantitative and qualitative assessments, we have done both, which is normal and indeed essential.
Latvia convincingly meets the five Maastricht criteria for euro adoption: Inflation is well below the reference value; the fiscal deficit and public debt are both on a sustainable path; the exchange rate has remained stable vis-à-vis the euro without any signs of tension and long-term interest rates have converged to low levels. Moreover, the legal framework has been brought fully in line with the Treaty requirements in Latvia.
In addition to this more quantitative assessment we have done a qualitative analysis. In other words, we have also examined additional factors which are relevant for sustainable convergence. Latvia's external balance has improved strongly, mainly based on gains in competitiveness. Its product, labour and financial markets are well-integrated with the euro area economy and financial supervision and regulation have been strengthened and of course once Latvia becomes a member of the eurozone, it will also become a member of the Banking Union and thus subject to the Single Supervisory Mechanism and other parts of the Banking Union, like the future prospective Single Resolution Mechanism.
Euro adoption of course will be a big and hard-earned achievement for Latvia. But it is not the end of the road. It will be essential to continue with sound economic and structural policies, in order to ensure a smooth performance within the eurozone, in order to realise the full benefits of monetary union and minimise risks in the future.
Latvia's prospective euro adoption is a strong signal to the region, to the euro area and to the global community and markets at large. It underlines the integrity of the euro and shows that sustained and stability-oriented policy action generate concrete results and economic reforms pay off.
Thank you for your attention.