Latvian euro coins

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Latvia replaced its previous currency, the lats, with the euro on 1 January 2014,[1] after a European Union (EU) assessment in June 2013 asserted that the country had met all convergence criteria necessary for euro adoption. The adoption process began 1 May 2004, when Latvia joined the European Union, entering the EU's Economic and Monetary Union. At the start of 2005, the lats was pegged to the euro at Ls 0.702804 = €1, and Latvia joined the European Exchange Rate Mechanism (ERM ll), four months later on 2 May 2005.[2]

History[edit]

Latvia's Treaty of Accession to the European Union (EU) obliged it to eventually adopt the euro. Latvia had originally planned to adopt the euro on 1 January 2008, but for various reasons this was subsequently delayed several times.[3][4] After being elected in 2011, Latvian President Andris Bērziņš announced the official goal was for Latvia to join the eurozone in 2014, saying "personally I'm very optimistic we'll join the euro on 1 January 2014. It's our goal and we are working hard to implement this process."[5] In September 2012, Latvian Prime Minister Valdis Dombrovskis reiterated that "Latvia is on track for 2014 and permission to join would be sought in 2013."[6][7]

Convergence[edit]

Before Latvia could adopt the euro, it had to meet five convergence criteria set by the EU. An assessment by the European Central Bank (ECB) in April 2012 found that Latvia met three of the five criteria. The Latvian Finance Minister announced in December 2012 that since convergence checks were only conducted biennially, an extraordinary report would be requested in February 2013,[8] but in January 2013 Prime Minister Dombrovskis stated that for "technical reasons" the request had been delayed until March. However, he was confident that Latvia was "fulfilling the Maastricht euro adoption criteria with a considerable reserve, therefore I don't see any basis on which this convergence report would be negative."[9] The Latvian government formally applied for a convergence check at the beginning of March,[10] and the resulting convergence report, published on 5 June 2013 by the European Commission, concluded that "the Commission considers that Latvia fulfils the conditions for the adoption of the euro."[11] The ECB simultaneously published a report which noted that "Latvia is within the reference values of the convergence criteria".[12] Latvia's adoption of the euro, a legal obligation now that the convergence criteria have been met, was given final approval by the Economic and Financial Affairs Council on 9 July,[13][14][15] and the lats was replaced with the euro on 1 January 2014.[1] The Euro switchover ceremony took place at a site where Latvia’s crisis began – the former headquarters of the collapsed Parex bank, now headquarters of state-owned Citatele bank, which emerged from Parex’s ruins.[16]

Status[edit]

Convergence criteria
Assessment month Country HICP inflation rate[17][nb 1] Excessive deficit procedure[18] Budget deficit to GDP[19] Debt-to-GDP ratio Exchange rate Long-term interest rate[20][nb 2]
ERM II member[21] Change in rate[22][23][nb 3]
2012 ECB Report[nb 4] Reference values max. 3.1%[nb 5]
(as of 31 Mar 2012)
None open
(as of 31 March 2012)
max. 3.0%
(Fiscal year 2011)[25]
max. 60%
(Fiscal year 2011)[25]
min. 2 years
(as of 31 Mar 2012)
max. ±15%
(for 2011)
max. 5.80%[nb 6]
(as of 31 Mar 2012)
 Latvia 4.1% Open 3.5% 42.6% 6 years, 10 months 0.3% 5.77%
2013 ECB Report[nb 7] Reference values max. 2.7%[nb 8]
(as of 30 Apr 2013)
None open
(as of 30 Apr 2013)
max. 3.0%
(Fiscal year 2012)[27]
max. 60%
(Fiscal year 2012)[27]
min. 2 years
(as of 30 Apr 2013)
max. ±15%
(for 2012)
max. 5.5%[nb 8]
(as of 30 Apr 2013)
 Latvia 1.3% Open
(Closed in June 2013)
1.2% 40.7% 8 years, 10 months 1.3% 3.84%


  Criterion fulfilled
  Criterion potentially fulfilled: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has deemed 3.5% to be close by in the past),[28] then the criteria can still potentially be fulfilled if either the deficits in the previous two years are significantly declining towards the 3% limit, or if the excessive deficit is the result of exceptional circumstances which are temporary in nature (i.e. one-off expenditures triggered by a significant economic downturn, or by the implementation of economic reforms that are expected to deliver a significant positive impact on the government's future fiscal budgets). However, even if such "special circumstances" are found to exist, additional criteria must also be met to comply with the fiscal budget criterion.[29][30] Additionally, if the debt-to-GDP ratio exceeds 60% but is "sufficiently diminishing and approaching the reference value at a satisfactory pace" it can be deemed to be in compliance.[31]
  Criterion not fulfilled


Notes
  1. ^ The 12-months average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
  2. ^ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
  3. ^ The change in the annual average exchange rate against the euro.
  4. ^ Reference values from the ECB convergence report of May 2012.[24]
  5. ^ Sweden, Ireland and Slovenia were the reference states.[24]
  6. ^ Sweden and Slovenia were the reference states, with Ireland excluded as an outlier.[24]
  7. ^ Reference values from the ECB convergence report of June 2013.[26]
  8. ^ a b Sweden, Latvia and Ireland were the reference states.[26]

Failed calls for a referendum[edit]

Some members of Latvia's parliament, the Saeima, originally pushed for a referendum on euro adoption,[32] but Latvian Prime Minister Valdis Dombrovskis argued that a referendum is unnecessary because Latvians already voted in favour of their EU accession treaty in 2003, which binds them to adopt the euro as soon as the country is found to comply with all the convergence criteria. He argued that, given the legal obligation, a referendum could only serve to delay euro adoption.[33] According to Latvian law, if more than 1/3 of all members of parliament object to a bill, and propose an alternative bill within two weeks of the original bill being passed by parliament, a referendum can be called to allow the public to decide between the two bills. On 31 January 2013, the Latvian parliament passed its "euro adoption bill". Four days later, the biggest opposition party, Harmony Center, stated that it would not support the alternative "referendum bill", which was tabled by the other opposition party, Union of Greens and Farmers.[34] Shortly after this, on 9 February, the referendum proposal had only gathered the support of 4 out of the Saeima's 100 members. These MPs stated that they would turn to the last remaining legal option to force a referendum: gathering a petition of at least 30,000 electoral signatories.[35] Latvia officially requested an extraordinary convergence report to assess their readiness for euro adoption on 4 March 2013.[36] Latvia's Central Election Commission rejected the proposed referendum on 18 March, as the proposed bill was considered not to comply with the Latvian constitution or Latvia's international obligations.[37]

Roadmap for euro adoption[edit]

A draft law outlining the euro switchover process was presented by the government's cabinet on 6 November 2012. It specified that:

  • ATMs would stop distributing Lats from 1 January 2014.
  • Both Lats and Euros would be in circulation for two weeks.
  • Post offices would offer free exchange for a month (this was later extended to three months[38]).
  • All shops would be required to have dual price displays for three months before and until six months after the adoption.[39]

The law was passed on 31 January 2013.[9][40]

Linguistic issues[edit]

Advertising on a tram using the word 'eiro' for the euro.

The Latvian Parliament adopted on 26 July 2005 "Regulation Nr.564", outlining that the official Latvian name of the euro currency would be "eiro". In December 2007 the regulation was amended, so that the name in all legal matters would be "euro" and in all non-legal matters "eiro". The ECB was asked to approve this special naming convention, but declined on 13 November 2012 and asked Latvia to repeal either the entire regulation or at least the paragraph that granted the euro currency a special Latvian name.[41] On 4 March 2013, the Latvian Ministry of Justice clarified that while the official name of the currency for all financial and legal documents shall be "euro", the public will continue to be able to use the Latvian name "eiro", furthermore it is required to write "euro" in italics indicating the word is in a foreign language.[42]

Latvian euro design[edit]

Latvian euro coins feature three separate designs on the national side,[43] which were publicised in July 2006 on the home page of the National Bank of Latvia. The designs featured were the Latvian maiden, which was featured on the 5 lats coin prior to World War II, on the 1 and 2 euro coins, the greater Coat of arms of Latvia on the 10, 20 and 50-cent coins, and the lesser Coat of arms of Latvia on the 1, 2 and 5-cent coins. Originally, it was planned that Freedom Monument would be featured on the 2 euro coin, but the original design did not meet the regulations of the ECB since it reached out into the ring of the coin and changed one of the stars. Latvia decided that a changed design of the monument would not be as recognisable and decided to use the Latvian maiden, used on the 1 euro coin, on the 2 euro coin as well.[44]

For the design of images on the common side and a detailed description of the coins, see euro coins.

Depiction of Latvian euro coinage | Obverse side
€0.01 €0.02 €0.05
LV 1 cents.png LV 2 centi.png LV 5 centi.png
Lesser coat of arms of Latvia
€0.10 €0.20 €0.50
LV 10 centi.png LV 20 centi.png LV 50 centi.png
Greater coat of arms of Latvia
€1.00 €2.00 €2 Coin Edge
LV 1 eiro.png LV 2 eiro.png 2 eiro LV josta.jpg(GOD BLESS LATVIA)
Latvian maiden

A tender for minting the Latvian euro coins began on 20 September 2012.[45][46] On 10 December 2012, it was announced that Latvia will utilise the Baden-Württemberg Mint.[47][48] The production of Latvian euros began in July 2013.[49]

References[edit]

  1. ^ a b "Latvia becomes the 18th Member State to adopt the euro". European Commission. 31 December 2013. Retrieved 31 December 2013. 
  2. ^ "ECB: Euro central rates and compulsory intervention rates in ERM II". European Central Bank. Retrieved 1 January 2014. 
  3. ^ "Don't look for the Euro until after 2012". New Europe. 18 August 2007. Archived from the original on 23 December 2007. Retrieved 27 December 2007. 
  4. ^ "Bank targets 2013 as Latvia's 'E-day'". baltictimes.com. 26 October 2007. Retrieved 28 October 2007. 
  5. ^ Pop, Valentina (15 September 2011). "Latvia aiming to join eurozone in 2014". EU Observer. Retrieved 15 September 2011. 
  6. ^ Latvia still keen to join single currency despite euro crisis, Guardian 19 September 2012
  7. ^ "Latvia on track to join euro in 2014, says PM". EU Observer. 22 October 2012. Retrieved 22 October 2012. 
  8. ^ "INTERVIEW: Latvia to apply to join euro zone in February 2013". Reuters Middle East. 18 December 2012. Retrieved 24 January 2013. 
  9. ^ a b "Latvian parliament paves way to euro switch". EurActiv. 1 February 2013. Retrieved 3 February 2013. 
  10. ^ "Latvia and the euro". European Commission. 5 March 2013. Retrieved 31 March 2013. 
  11. ^ "Convergence Report 2013 on Latvia". European Commission. June 2013. Retrieved 16 June 2013. 
  12. ^ "Convergence Report". European Central Bank. June 2013. Retrieved 16 June 2013. 
  13. ^ "Press release - 3252nd Council meeting - Economic and Financial Affairs". Council of the European Union. 2013-07-09. Retrieved 2014-01-23. 
  14. ^ "Commission: Latvia meets the conditions for adopting the euro". European Commission. 5 June 2013. Retrieved 16 June 2013. 
  15. ^ "Latvia Wins Final EU Approval to Adopt Euro on Jan. 1 Next Year". Bloomberg. 9 July 2013. Retrieved 9 July 2013. 
  16. ^ "Latvia caps years of austerity with euro zone membership". Euronews. 1 January 2014. Retrieved 5 January 2014. 
  17. ^ "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012. 
  18. ^ "The corrective arm". European Commission. Retrieved 2014-07-05. 
  19. ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013. 
  20. ^ "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012. 
  21. ^ "What is ERM II?". European Commission. 31 July 2012. Retrieved 8 September 2012. 
  22. ^ "Euro/ECU exchange rates - annual data (average)". Eurostat. Retrieved 5 July 2014. 
  23. ^ "Former euro area national currencies vs. euro/ECU - annual data (average)". Eurostat. Retrieved 5 July 2014. 
  24. ^ a b c "Convergence Report May 2012". European Central Bank. May 2012. Retrieved 2013-01-20. 
  25. ^ a b "European economic forecast - spring 2012" (PDF). European Commission. 1 May 2012. Retrieved 1 September 2012. 
  26. ^ a b "Convergence Report". European Central Bank. June 2013. Retrieved 2013-06-17. 
  27. ^ a b "European economic forecast - spring 2013" (PDF). European Commission. February 2013. Retrieved 4 July 2014. 
  28. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012. 
  29. ^ "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012. 
  30. ^ "Progress towards convergence - Nov. 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 22 November 2012. 
  31. ^ "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 17 March 2013. 
  32. ^ Duxbury, Charles (28 February 2013). "Lithuania's New Leader Says Nation Wants Euro". The Wall Street Journal. Retrieved 3 March 2013. "However, some Latvian lawmakers recently sought a referendum on that country's move" 
  33. ^ "If opposition initiates referendum on euro, Latvia will fall behind euro introduction timetable". 10 December 2012. Retrieved 3 March 2013. 
  34. ^ "Latvia's Biggest Opposition Party Won't Seek Referendum on Euro". Bloomberg L.P. 4 February 2013. Retrieved 6 March 2013. 
  35. ^ "Four members calls for the suspension of the Euro Law, however, the President will enact the law" (in Latvian). Delfi.lv. 8 February 2013. Retrieved 6 March 2013. 
  36. ^ "Latvia formally applies for eurozone membership". Euractiv.com. 4 March 2013. Retrieved 4 March 2013. 
  37. ^ "CEC decided not to register the proposed referendum bill about the introduction of the euro" (in Latvian). Delfi.lv. 18 March 2013. Retrieved 18 March 2013. 
  38. ^ "Saeima adopted the euro Law". Saeima. 31 January 2013. Retrieved 16 February 2013. 
  39. ^ "Latvia on Road to Adopt Euro in 2014". Sofia News Agency. 7 November 2012. Retrieved 7 November 2012. 
  40. ^ "Introduction of the euro Law (No: 459/Lp11)". Saeima. 16 November 2012. Retrieved 30 November 2012. 
  41. ^ "OPINION OF THE EUROPEAN CENTRAL BANK: On the spelling of the single currency (CON/2012/87)" (PDF). European Central Bank. 13 November 2012. Retrieved 6 March 2013. 
  42. ^ "Society and public space will continue to be able to use the word "eiro"" (in Latvian). Latvian Ministry of Justice. 4 March 2013. Retrieved 6 March 2013. [dead link]
  43. ^ "The Origins of Euro Coins: Latvia". National Bank of Latvia. Retrieved 12 July 2008. 
  44. ^ "Latvian Euro Coins". eiro.lv. Retrieved 25 January 2013. 
  45. ^ "Bank of Latvia Announces Tender to Mint Euro Coins for Latvia". Latvia Today. 27 September 2012. Retrieved 27 October 2012. 
  46. ^ "Tender Regulation: On the Potential Production, Packaging and Delivery of the Latvian Euro Circulation Coins (Amended by Resolution of Minutes no.3 meeting)" (PDF). Bank of Latvia. 20 November 2012. Retrieved 30 November 2012. 
  47. ^ "The Design Models of the Latvian Euro Coins". Bank of Latvia. Retrieved 18 July 2013. 
  48. ^ "Latvian euro coins Kal Germany for 5.306 million" (in Latvian). FinanceNet. 10 December 2012. Retrieved 21 December 2012. 
  49. ^ "Vācijā sākta Latvijas eiro monētu kalšana". 31 July 2013. Retrieved 23 November 2013. 

External links[edit]