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Latvia is set to switch to the euro currency on Jan. 1 (photo by images_of_money/ source: flickr)
Latvia will adopt the euro at midnight, becoming the 18th eurozone member state to do so.
The euro will replace the lat according to the official exchange rate of 1 euro per 0.70 or 70.3 santims. All money deposited in banks, as well as loans in lats issued to residents and companies will be automatically converted to euros according to the official exchange rate.
Starting January, salaries, pensions and benefits will be paid in the euro currency.
In the first two weeks of 2014, both currencies will be circulated; the change in almost all cash transactions will be given in euro with the exception of public transport, where passengers who pay for tickets in lats will be issued change in lats also, those who pay for tickets with euros will be issued change in euros.
Residents are recommended to use bankcards or give precise cash during this period. The lat will cease to be legal tender on January 15.
Lats will be exchanged for euros free of charge and according to the official rate for six months in commercial banks, and for three months in 302 regional post offices of "Latvijas Pasts" postal company in those areas where banking services are not available to local residents. At the Bank of Latvia, lats will be exchanged for euros in perpetuity.
The same euro bills will be circulated in Latvia as anywhere else in the eurozone, the design of euro bills features bridges, arches, and gateways as symbols of Europe's unity. There are seven denominations of euro bills: 5, 10, 20, 50, 100, 200 and 500 bills.
Also, there are eight denominations of euro coins: 1, 2, 5, 10, 20 and 50 cent coins as well as 1 and 2 euro coins. The coins have a common or "European" side and a national side, which indicates the issuing country.
Latvia's euro cent coins show the small coat of arms of the Republic of Latvia, whereas Latvian euro coins feature a Latvian folk maiden. Latvia's euro coins were struck at the Baden-Wurtemberg State Mint in Germany.
Even though most of the euro coins in circulation in Latvia will bear Latvian design, legal tender in the euro area are all euro coins, that is, euro coins issued by other countries will also circulate, and Latvian coins will be legal tender in other euro area countries.
After Latvia's joins the euro area, all Latvian lat bills and coins will be taken out of circulation and destroyed.
The adoption of the euro by Latvia is stipulated in Latvia's EU accession agreement. Latvia's progress toward the eurozone was not as smooth as originally anticipated: Latvia initially wanted to adopt the euro in 2008, but this was impossible as the country was unable to meet the Maastricht criteria. At that time, high inflation was the main problem for Latvia. During the economic crisis in 2009 and 2010, Latvia had excessively large budget deficit.
On March 24, 2010 the Latvian government decided that Latvia would adopt the euro on January 1, 2014, and began to implement the euro policy for the country to attain the goal. The European Commission and European Central Bank published positive convergence reports on Latvia this past June, confirming that the country met all the criteria to introduce the euro. In July, EU finance ministers made the final decision on Latvia's full-fledged participation in the eurozone.
The eurozone members include: Austria, Belgium, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Finland, Spain and Germany from 2002, Slovenia from 2007, Cyprus and Malta from 2008, Slovakia from 2009 and Estonia from 2011.
Economists predict that Latvia's neighbor Lithuania will be able to join the eurozone in 2015.