Euro adoption in Latvia was tool to better use advantages of European single market - Rinkevics

  • 2024-01-26
  • LETA/TBT Staff

RIGA - In Latvia, the adoption of the euro currency was a tool allowing to better use advantages of the European single market, President Edgars Rinkevics said as he opened the international conference "Ten Years with the Euro" organized by the European Commission and the Bank of Latvia on Friday.

The Latvian president said that the year 2024 is a time for celebration, but also for reflection. Twenty years ago, Latvia became a member of the European Union (EU) and NATO, and ten years ago it introduced the euro currency. The president underlined that these were purposeful decisions, worked on by politicians, public servants and diplomats of several generations, which today contribute to Latvia's security and credibility with partners and investors alike.

"Looking back, joining the euro area was a difficult and stressful process. Before the euro was introduced, around half of the Latvian population supported the move, while at the very beginning of the journey it was around 30 percent. Now, however, an overwhelming majority of the Latvian public fully supports Latvia's membership in the euro area," the president said.

Rinkevics noted that the discussions at that time were emotional, but also rational. For some, the euro was associated with economic stability, predictability, development and another step towards closer EU integration. Others were reluctant to give up monetary independence, the recently regained national stable and also beautiful currency, the lats.

The president emphasized that in 2024 the euro has become an integral part of the Latvian economy and our everyday life. The introduction of the euro has boosted Latvia's competitiveness and facilitated the mobility of citizens and businesses in the EU. In Rinkevics' view, it has also greatly strengthened Latvia's ties with Europe.

The president drew attention to the fact that for many years the viability of the euro has been questioned, but the euro has consistently proved its strength. The president pointed out that it is an amazing story how the euro has been able to adapt. In 2014, Latvia was the 18th country to join the euro area.

"At that time, Latvia had become a reliable member of the EU and NATO. Consistent decisions foster closer ties with the West, which is the foundation of our security and defence. We also see it as a cornerstone of Ukraine's fight against aggression," Rinkevics said.

He pointed out that Latvia adopted the euro only four years after the global financial crisis and has made significant progress since then. According to the president, the euro has proved to be a powerful tool for our economic stability and EU integration. It also provides a sense of security and confidence for businesses and society.

"After the introduction of the euro, Latvia has had to weather several storms, with the Covid-19 pandemic posing a huge challenge to our businesses and society. The government's support package helped to prevent, or at least mitigate, the economic downturn. After the pandemic, our economy was one of the least affected in the EU. This is different from the previous financial crisis, when Latvia's economy contracted the most," said Rinkevics.

The president said that Russia's war against Ukraine has tested Latvia's resilience. Latvia  used to rely on imports of raw materials and energy from Russia. Moreover, the war caused a sharp rise in inflation. Rinkevics stressed that within one year, most Latvian companies had managed to restructure their supply routes and find new partners. Most of them are in Europe, but without the euro this would not have been possible so quickly.

In his view, the resilience of our economy shows that Latvia is better off with the euro than it would have been without it. Latvia still has a better credit rating and lower interest rates on government borrowing than countries that have not joined the euro.

At the end of his address, the president concluded that the to-do and not-to-do list was well known. We need to invest in human capital, connectivity, sustainability and innovation. We also need to streamline administrative processes to increase efficiency. Rinkevics expressed his conviction that Latvia has the necessary potential and the right conditions. Now is the right time to take decisions and act, he said.