Latvia's Steps Towards the Euro Changeover
To ensure an efficient euro implementation process in Latvia there have been several activities already performed.
Since January 1, 2005, the exchange rate of the lats against the euro is fixed at 1 EUR = 0.702804 LVL
On May 2, 2005, Latvia joined Exchange Rate Mechanism II (ERM II)
Exchange Rate Mechanism II (ERM II)
ERM II is a multilateral agreement aimed at fostering exchange rate stability and coordination in Europe. Joining ERM II is also necessary for Latvia to introduce the euro and become a full-fledged member of the Economic and Monetary Union (EMU). ERM II is an arrangement whereby, following multilateral consultations that involve the EMU Member States, the European Central Bank (ECB), the European Commission, ERM II participating countries and the ERM II candidate country, an ERM II participant pegs its national currency to the euro.
Latvia joined ERM II with the lats pegged to the euro at 1 EUR = 0.702804 LVL. In ERM II, rate moves within the standard ±15% fluctuation margins around the central rate are allowed. However, Latvia made a unilateral commitment to ensure a band of ±1% thus maintaining the existing fluctuation band that has been accepted by the financial market and effective as of pegging the lats to SDR in 1994 and was kept when re-pegging the lats to the euro on 1 January 2005.
Pursuant to the euro introduction criteria, the EU Member State has to participate in the ERM II for at least two years. However, the length of this period depends on compliance with Maastricht criteria (several economical requirements regarding inflation rate, interest rate, budget deficit and government debt).
To decide on Latvia's readiness for the euro changeover, the EC and the ECB, following the Government's proposal, will draft the convergence report: an assessment on the country's maturity for participation in the EMU. In the event of positive assessment Latvia will join the EMU and introduce the euro as a legal tender in the country.
The Euro Changeover Project in Latvia has been developed and implemented. Responsible public institutions, financial and commercial institutions, as well as NGOs within the framework of this project plan necessary activities and cooperate to ensure their implementation.
One of key steps taken by Latvia is development of Latvia's National Euro Changeover Plan. This plan prescribes tasks related to the euro changeover, their deadlines and responsible authorities, as well as defines the euro introduction principles and scenario of the process.
