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. 

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  1. Latvia is set to become the eighteenth country to join the eurozone after the European Commission approved the country’s bid to join the single currency.

    And Latvia wants to join this cluster why?

    1. For small countries, currency credibility is more important than the control that your own currency provides.

      To countries like Latvia, joining the Euro shows investors that they are willing to forgo any currency shenanigans.

      1. How are those Greek bonds doing?

        1. Greek bonds are doing about as well as they would be if Greece still had its own currency. Greece isnt the victim of some macroeconomic conspiracy related to the euro, they spent themselves into bankruptcy, pure and simple.

          You could argue that the only reason Greece was able to borrow so much in the first place is because their bonds were denominated in a currency they couldnt just devalue when things got out of hand. This is the thing that the Krugmans of the world dont get when they blather on about how if Greece had their own currency they could just devalue their debt and print their way into a recovery. If Greek bonds were payable in Drachmas, no one would buy them because they know that Greece would do just that, print money to pay their debts. IF your a country like Latvia, joining the euro is your way of proving that you wont do that, that you have enough economic discipline to operate in a regime where you cant just print your way out of trouble.

          1. Sure, can i pay you in MOFO-bucks or would you rather have Euros?

            1. Damn double post, this was a response to Bryan C below.

      2. You sound like a man who knows a great opportunity when he sees it. Can I interest you in the amazing investment potential of Magic Beans?

        1. Sure, can i pay you in MOFO-bucks or would you prefer Euros?

  2. Damn Europeans and their hatred of freedom, including the freedom to say what you want about a picture in an accompanying caption that only appears when you hover over it.

  3. 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

    lolwut

  4. let’s get on the sinking ship! Maybe we can get on a first class lifeboat.

    1. I kinda think you hit the nail on the head right there. Not sure if you were being purely sarcastic, but I think that’s exactly what’s happening.

      Extending the metaphor: If you’re on a tiny little raft and the giant ship you’re tethered to is sinking, threatening to pull you down with it, getting on the big ship and trying to get to a lifeboat may be your best option.

      Just my thoughts.

  5. People usually don’t try to get aboard a sinking ship.

    1. Governments do though.

  6. Their hats suddenly seem much less enticing.

  7. The only reason I could see wanting to join the Eurozone would be to force your debt onto productive countries like Germany.

    1. Somebody get Latvia into grad school!

    2. Do you get to give the 50% of unemployed 20 year olds to Germany too?

      1. As long as they have free health insurance and access to birth control, what’s the problem?

      2. The Germans are skilled at building reeducation institutions.

        1. Citation needed.

        2. Yes, that’s unfair. They don’t reeducate, they eradicate. A subtle distinction.

    3. If you’re already in an austerity regime, gaining free trade to, oh, all of Western Europe might be useful.

      1. Countries can join the EU and be part of it’s common market without joining the euro.

        1. Isn’t that what the UK did?

  8. Don’t do it Latvia!

  9. So, now’s a good time to short Latvia?

    1. What I don’t understand is why we don’t make similar offers to other countries. “The EU? Seriously? A disaster. Join the United States. A better economy despite our best efforts to kill it, better protection of your freedoms, and a military that can protect you from everyone.”

      1. and a military that can protect you from everyone

        Except for dog shooting cops.

      2. Join the United States.

        This idea has been floated around here – however, about as seriously as the long-running joke about declaring war to Sweden and surrendering before they realize what’s happening.

  10. It’s Riga. The politicians would tell you boarding a box car is good idea, too, because all your friends are in it.

    1. Do you have some specific knowledge or are you just pulling this out of your ass?

      1. The government of Latvia, like most of the governments of the countries the Nazis invaded, helped quite a bit with the Holocaust. About the only government or populace that didn’t help out, IIRC, were the Danes, though some European populations were more bloody-minded about it than others. I don’t know if the Latvians were excessive in that regard.

        Richard Rhodes’s book on the Einsatzgruppen, “Masters of Death,” goes into much more detail on the eradication campaign, particularly just south in Lithuania at the 9th Fort. Some of it talks about pogroms in Riga too. It’s a short, very depressing read. The wiki on the Holocaust in Latvia is a thorough introduction.

  11. Did Dr. Doom approve this?

    1. He’s finally accepted that his Latinum mines have been played out.

  12. Latvian Prime Minister of Latvia, Valdis Dombrovskis

    Usually this position is held by a foreign national?

    1. No. Each ethnic group shares the PM slot.

    2. Technically, there is no such position. In Latvian, it’s called ‘Ministru prezidents‘ (translation obvious 🙂 as opposed to ‘Valsts prezidents’ (president of the state). This weird naming convention goes back to 1918. These days, it’s usually translated as ‘prime minister’ but that’s as loose as calling Kerry ‘minister for foreign affairs’ or something like that.

  13. Paging Admiral Akbar. Admiral Akbar, please call your office.

  14. Sort of like joining the League of Nations in 1938.

  15. my roomate’s aunt makes $79/hr on the laptop. She has been without work for 6 months but last month her check was $21084 just working on the laptop for a few hours. Read more on this web site…. http://www.Taz1.com

  16. You know who else wanted Latvia to join something?

  17. Dude knows he is talking some serious smack!

    http://www.WorldPrivacy.tk

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