BRUSSELS (AP) — The euro may stand for precarious economic rescues for some, but Latvia said Tuesday that it hoped joining the single currency would bring investment and development.
At a meeting in Brussels, European Union finance ministers officially agreed to make the Baltic state the 18th member of the eurozone currency union, at a time when many of its partners are struggling with low growth and high unemployment. Latvia will start using the new currency on Jan. 1, 2014.
"It's very symbolic," said Latvian Finance Minister, Andris Vilks. "We are completing our integration into core Europe."
U.S. ratings agency Fitch welcomed the decision, upgrading Latvia's long-term credit rating one notch from BBB to BBB+.
Once it has joined the eurozone, Latvia's economy would be the third-smallest of the group, larger only than those of Cyprus and Malta. With annual output of about 22.3 billion euros ($29 billion), it would account for just 0.2 percent of the overall eurozone economy.
Latvia's prime minister, Valdis Dombrovskis, added that the moment wasn't just about symbolism: He said the euro would reduce currency conversion costs for the tiny country, attract foreign investment and bring more development. He noted that 70 percent of Latvia's foreign trade is already done in euros.
European finance ministers and officials brushed aside concerns that it might be difficult to enlarge the eurozone while the region struggles to support cash-strapped members.
"Those countries that take care of their sustainable economic development by avoiding excessive macroeconomic imbalances or unsustainable public finances, they do succeed and benefit from euro membership," said Olli Rehn, the EU's economic and monetary affairs commissioner.
Irish Finance Minister Michael Noonan called Latvia's adoption of the euro — along with Croatia's recent joining of the EU — "absolutely amazing when you pull back from the day-to-day workings of the crisis."
But not many Latvians see it that way; polls suggest that less than half the population supports the move — not unsurprising after several years of crisis that has seen Greece, Ireland, Portugal and Cyprus all receive bailouts and raised questions about the very survival of the currency.
Dombrovskis said he was confident that a majority of Latvians would be behind the euro by the time it enters into circulation, saying that the government was currently conducting a massive information campaign to explain both the reasons behind the move and the practicalities of it.
Each eurozone country gets to design its own coins, and Latvia's will carry the profile of Milda, who represents Latvian nationhood, Dombrovskis said. The country's coins from the 1920s and 1930s carried her image, he added, and many Latvians held onto them during Soviet rule as a quiet reminder of their independence.
Dombrovskis also addressed concerns that Latvians will see prices rise when the euro enters into force. The national currency, the lat, is already pegged to the euro, and will be converted over at that exchange rate, so prices, in theory, should not change. But many eurozone consumers found that merchants took the opportunity of the changeover to hike prices, as they rounded them off.
The prime minister noted that one lat is worth more than one euro, so prices converted into euros will seem higher than they did in lats — which was not the case for most other countries. He said this would create an added check on merchants.
"What people will see on prices tags, they will see bigger figures, and certainly people psychologically will not like those bigger figures, and they (will) double-check that it is the correct price," he said.