Latvia becomes 18th to adopt euro

Latvia will adopt the euro from the beginning of next year, becoming the 18th member of a currency union that just a year ago risked disintegration due to the credit crisis, CNN reported.

European Union finance ministers gave the ex-Soviet state on the Baltic Sea the green light Tuesday to swap its currency - the lat - for euros starting on January 1, following recommendations from EU officials and the European Central Bank.

Latvia gained its independence from the Soviet Union in 1991 and joined the EU and NATO in 2004.

It has a population of two million - nearly 30% of Russian origin - and annual gross domestic product of 22 billion euros ($28 billion), equivalent to just 0.2% of eurozone output. It will be the fourth smallest member of the currency area, ahead of Cyprus, Estonia and Malta.

Talk of a eurozone break up reached fever pitch early last year as a political crisis in Greece threatened to torpedo its rescue by EU partners and the International Monetary Fund.

The ECB's pledge in July 2012 to backstop the euro restored market calm. But nerves were jangled again earlier this year when the Mediterranean island of Cyprus went into meltdown, triggering a bailout that imposed losses on savers, a massive downsizing of its banking industry and an aggressive austerity program.

Latvia's accession - the first since Baltic neighbor Estonia joined in 2011 - is a vote of confidence in the world's biggest currency union, which is still grappling with recession and record unemployment, and represents a dramatic turnaround in fortunes for the new euro member.


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