Europe

Latvia Set To Join the Euro

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Credit: Xil/wikimedia

Latvia is set to become the eighteenth country to join the eurozone after the European Central Bank approved the country's bid to join the single currency.

Given the current situation in the eurozone it is natural to wonder why any country would feel that now would be a good time to join the euro given the anti-euro sentiment in Latvia, with anti-euro parties winning over half of the votes in recent municipal elections in Riga, Latvia's capital.

Latvian Prime Minister Valdis Dombrovskis told CNBC why he thinks Latvia joining the euro is a good idea:

"First of all it's worth noting that our currency, the lats, is pegged to the euro so whatever is happening to the euro is happening to the lats. Then if you look at the euro as a currency, no one is worried about the euro as a currency. If anything they're worried about the euro being too strong," he told CNBC Europe's "Squawk Box."

"So what we're having is financial and monetary crisis in certain euro zone countries, which need to be addressed – so the euro is not the key problem here," he added.

Another reason why the Latvian government might be keen to join the euro is that the move would allow the Baltic country, once under Soviet control, to distance itself from Russia while strengthening ties with western Europe.

I have written before about the Latvian attitudes towards austerity, which are seemingly at odds with the attitudes of many Greeks, Italians, and Spaniards. How well Latvia will fit into the eurozone remains to be seen. Given the economic situation in the eurozone it is possible that in a few years the move to join the euro will be considered a more significant political rather than economic achievement.

Note: This post originally incorrectly stated that it was the European Commission that approved Latvia's bid to join the euro. The European Commission has said that Latvia is ready to join the eurozone.