c.2013 New York Times News Service
c.2013 New York Times News Service
FRANKFURT, Germany — The euro not only survived 2013, it thrived. And, at the stroke of midnight in Eastern Europe on Tuesday, the currency even adds a new member.
Latvia is the 18th nation to adopt the euro, a development that might have seemed unlikely only two years ago, when many wondered if the euro would even survive.
But now that the European economy has stabilized — and talk has quieted that Greece may leave and splinter the Europe’s currency union — the euro is actually appreciating in value. The euro rose 4.5 percent against the dollar in 2013, its best showing in years. The euro is now at 1.38 to the dollar.
“This is a major event, not only for Latvia, but for the euro area itself, which remains stable, attractive and open to new members,” José Manuel Barroso, the president of the European Commission, said in a welcoming statement Tuesday.
The tiny Baltic nation is the first to join the eurozone since neighboring Estonia in 2011. With 2.2 million people, Latvia is unlikely to shift the balance of power in the eurozone, which will have a total of 333 million residents. But Latvia at least keeps alive the idea that despite its problems the euro club still has potential to grow.
Polls showed that many Latvians were ambivalent about giving up their own currency, the lats. As a member of the currency union, Latvia no longer has the option of using the exchange rate as a safety valve in times of crisis.
However, the lats has been closely tied to the euro in any case. Many Latvians have mortgages or other loans denominated in euros, as is typical among countries in the European Union that are not also members of the eurozone. Latvia’s central bank has sought to maintain a stable exchange rate, in part to protect borrowers whose loan payments would soar if the lats lost value.
“Your country’s strong economic recovery offers a clear message of encouragement to other European countries undergoing a difficult economic adjustment,” Olli Rehn, vice president of the European Commission responsible for economic and monetary affairs and the euro, said in a statement.
As a euro member, Latvia also gains more influence over monetary policy. The governor of the central bank, Ilmars Rimsevics, will automatically become a member of the governing council of the European Central Bank, which sets benchmark interest rates for the eurozone.
Rimsevics, who earned degrees at St. Lawrence University in Canton, N.Y., and Clarkson University in Potsdam, N.Y., will have one vote on the council as its 24th member. At least on paper, he has the same clout as presidents of the central banks of larger countries like Germany or France.
Despite whatever doubts some Latvians may have about yoking themselves to a currency still emerging from a severe crisis, the euro signifies another stage in the country’s trek from Soviet state to a full-fledged member of Europe.
“Joining the euro marks the completion of Latvia’s journey back to the political and economic heart of our continent, and that is something for all of us to celebrate,” Rehn said.
Lats will continue to circulate alongside the euro for two weeks, at which point the euro will become the sole legal tender. However, lats can still be exchanged for euros at the central bank indefinitely. ATMs in Latvia are supposed to begin issuing euros within half an hour after the new year begins.