1st of January - Eurozone joined Latvia!

At the beginning of 2014 Latvia will become the 18th euro area member state (EN, DE, ES, FR)

On 1 January 2014 Latvia will become the 18th country of the euro area and will share a currency with more than 332 million people. The irrevocably fixed exchange rate is EUR 1 = LVL 0.702804.

The Latvian capital Riga will become the European Capital of Culture on 17 January 2014. During this year hundreds of special events will take place.

Latvia will hold the Presidency of the Council of the European Union in the first half of 2015. The basic principles for Latvia’s Presidency are involvement, growth and sustainability. During the Presidency around 200 events at different levels will be organized in Latvia and around 1500 meetings will be held in Brussels and Luxembourg.

Introduction of the Euro

Practical preparations for the changeover have entered a final stage. Latvian authorities have made a thorough and systematic effort over the last months to ensure a smooth and safe changeover process. Most of the activities are developed in close cooperation with and participation of a wide range of private and public sector institutions and experts.

In July 2013 a corporate initiative “Fair Euro Introducer” was launched to facilitate honest and transparent implementation of the euro in Latvia. The initiative is a form of co-operation among businesses, government and the public, helping to protect the people of Latvia against unjustified price increases as a result of euro adoption. In joining the initiative, participants publicly promise to strictly adhere to legislation related to euro adoption and pledge not to use euro introduction as a reason to raise prices. The project is implemented in close partnership with leading Latvian business organizations, Consumer Rights Protection Centre, media, and active segments of the civil society.

An on-going price monitoring is taking place. Prices of 120 frequently purchased products and services are observed in the largest cities of Latvia. The monitoring results in October demonstrate that 93.53% of prices are stable, 2.51% have increased and 4.06% have decreased, influenced also by seasonal economic tendencies.

In order to ensure that citizens are timely accustomed to prices in euros, from 1 October 2013 a compulsory period of dual price display has been set and it will remain for half a year after the euro changeover. During this period it is compulsory for all traders and service providers to display prices both in lats and euros. Authorities take this issue very seriously, increasing the number of supervisors by almost 10 times.

To ensure convenient cash circulation following the euro changeover starting from 1 January 2014, a two-week long dual circulation period of both currencies – lats and euros – will be introduced. During this period it will be possible to pay for goods and services in both currencies. Traders will be obliged to accept both coins and banknotes in lats and euros, while giving out change only in euros. 14 January 2014 will be the last day when lats will be accepted by traders. However, everyone will be able to exchange cash reserves in lats to euro according to the fixed rate and with no commission in commercial banks for six months following the euro introduction date, and three months in 302 Latvian Post offices in rural areas of Latvia. In addition, the Bank of Latvia will cash lats to the euro for unlimited period of time.

Design of Latvian euro coins and banknotes

The banknotes throughout the euro area are identical. However, each Eurozone country is allowed to put its design on the reverse of coins.

The design of the reverse of Latvian euro coins was chosen at an all-Latvian competition of ideas already in 2004. For the Latvian euro coins a jury of the competition of ideas chose images that symbolize Latvia and its core values. The head of a folk maiden symbolizing the Republic of Latvia and freedom from a 1929 silver lats coin will be depicted on the national side of the Latvian one-and two-euro coins, whereas the euro cents will feature the great and small coat of arms of Latvia.

Benefits of Latvia after joining the Eurozone

The economy of Latvia is at present closely linked to the euro as most businesses and households borrow loans in euros, more than half of all export and import transactions are in euros, and, for example, real estate prices are expressed in the Single European Currency as well. The euro will inevitably benefit exporting companies, eliminating currency conversion costs, making transactions easier and cheaper, while also reducing currency exchange risks.

The euro will bring greater stability and predictability to the economy of Latvia. This is very important for investors and financial markets in the current economic climate. Euro adoption will further increase Latvia’s credit ratings, hence improving integration in regional and global financial markets and widening access to sources of financing.

Euro adoption will lead to increased business and investment opportunities and more business partners. Having the euro as Latvia’s currency will ease access to more than 500 million consumers in the EU and elsewhere. One of the lowest Corporate income tax rates, namely, 15%, a highly developed communication infrastructure with the second fastest internet speed in Europe, favourable terms for setting up a company1, a convenient geographic location with three international ice-free ports, an international airport, a well-developed transport and logistics infrastructure, and highly skilled and multilingual workforce are seen as only a few of the existing benefits of doing business in Latvia.

Joining the euro area will significantly increase tourism potential. Tourists will be able to enjoy the Latvian nature, high and popular culture, unique architecture and numerous entertainment opportunities without comparing prices of goods and services in different currencies. That will make travelling not only more convenient and cheaper, but also more attractive to many.

Main steps towards the Euro

Latvia became an EU Member State on 1 May 2004, following a majority support in a national referendum. The Treaty of Accession also envisaged that Latvia will introduce the euro when ready.

To introduce the euro, Latvia had to comply with the criteria defined in the Maastricht Treaty. Even though Latvia had been hit hard among EU member states by the global economic crisis in 2009, after a series of reforms and austerity measures its economy rapidly recovered, even becoming a success story with the fastest growing economy in the EU in 2012 when Latvia’s GDP rose by 5.6%.

Latvia’s National Euro Changeover plan was approved by the Cabinet of Ministers on 19 September 2012 and is supplemented by a detailed Action Plan for the Introduction of the Single European Currency in Latvia. The Plan underlines measures, which should be implemented to ensure a successful euro-changeover process in Latvia.

On 5 June 2013 Latvia received the European Commission and the European Central Bank Convergence Report that confirmed fulfilment of all Maastricht criteria.

On 9 July 2013, the Council of the European Union approved Latvia’s request to join the euro area from 1 January 2014. Latvia is the second Baltic country to join the euro area following Estonia, which joined in 2011. Lithuania is planning to join the euro area in 2015.

For more information on introduction of euro in Latvia please visit www.eiro.lv and www.bank.lv.

media@eiro.lv

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1 Latvia ranked 25th for ease of doing business in 2013 according to The International Bank for Reconstruction and Development, World Bank.