Pegging the Lats to the Euro
On 30 December 2004, the Bank of Latvia set the exchange rate of the lats against the euro at 1 EUR = 0.702804 LVL
Pegging the lats to the euro means that as of establishing the peg, i.e., on 1 January 2005, the exchange rate of the lats has been fixed against the euro following the peg to the SDR basket of currencies under the previous arrangement effective for 10 years. The SDR basket of currencies is comprised of the four major world currencies: the US dollar, the euro, the pound sterling and the Japanese yen.
On 1 May 2004, Latvia joined the European Union (EU). As of the same day, the 10 new EU Member States have also been participating in the Economic and Monetary Union as Member States with a derogation, i.e., they are not yet full-fledged members of the Economic and Monetary Union (EMU) and do not meet the criteria set out in the EC Treaty.
After a Member State has ensured compliance with the criteria set out therein, it becomes an EMU member and introduces the euro, lika Slovenia (on 1 January 2007), Malta and Cyprus (1 January 2008), Slovakia (1 January 2009) and Estonia (1 January 2011) that joined the euro area.
Pegging the lats to the euro for at least two years before the planned introduction of the single currency, thereby ensuring possibly small fluctuations of the exchange rate of the lats against the euro, is among the mandatory criteria set out in the Treaty. Consequently, the pegging of the lats to the euro was the first necessary step towards the adoption of the euro as the local currency in the future.
More information - home page of the Bank of Latvia
