When Latvia decided to give up its currency, the lat, in favour of the euro, some commentators denounced it as an act of madness. Yet Latvia (population 2 million) is going ahead on January 1 to become the 18th member of the eurozone, and its neighbour Lithuania is likely to follow in 2015. So what is the pulling power of the crisis-ridden euro?
Not very strong among the Latvian people, to judge by opinion polls. A survey by SKDS, a Latvian pollster, found support for the euro had declined from 24 to 20 per cent in October, while opposition was rising.
The government says it will further integrate the former Soviet state into the European Union and lead to more economic growth.
Latvia suffered a catastrophic 22 per cent decline in its economy after the 2008 crash. Despite not being in the eurozone, the government kept the lat pegged to the euro. With the option of devaluation ruled out, draconian austerity measures cut wages, boosted poverty and social exclusion, and drove 10 per cent of the population abroad. It now has the EU’s highest growth rate.
Critics point out that joining the eurozone means Latvia may be called upon to join any bailout by the European Stability Mechanism to Greece, Spain or Portugal, countries with a higher standard of living than its own.
Valdis Dombrovskis, Prime Minister since 2009, will miss his crowning achievement. He resigned on November 27, taking responsibility for a supermarket roof collapse which killed 54.