Latvia Poised to Join Trio Meeting Euro Rules: Chart of the Day

Latvia is on course to join the euro region’s only three members that satisfy thresholds for public finances as it awaits a decision on its bid to adopt Europe’s common currency in 2014.

The CHART OF THE DAY shows that the Baltic nation met European Union limits last year with a budget deficit of 1.2 percent of gross domestic product and a government debt ratio of 40.7 percent of GDP, according to Eurostat data. Among the existing 17 euro-area members, only Finland, Estonia and Luxembourg stayed within the 3 percent and 60 percent maximums.

Latvia has transformed its public finances after the world’s worst recession in 2008 and 2009 prompted a 7.5 billion- euro ($9.8 billion) bailout and widened the budget gap to as much as 9.8 percent of GDP. Other euro-region nations such as Spain and Greece are struggling to narrow fiscal shortfalls and trim government debt as their economies shrink.

“Latvia is an example of a country that quickly addressed two problems plaguing all crisis countries in Europe -- falling competitiveness, represented by huge current-account deficits, and financial bubbles,” said Fredrik Erixon, director of the European Centre for International Political Economy in Brussels. “It’s now in a better shape than the crisis economies that started with less troubling economic conditions but scotched reforms to raise competitiveness.”

Latvia meets all conditions to switch to the euro Jan. 1, Prime Minister Valdis Dombrovskis said in February. A convergence report that will deliver the EU’s verdict on the country’s bid is due next month.

To contact the reporters on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net; Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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