Latvia’s approval of the European Union’s Fiscal Stability Treaty today is an important step as the Baltic nation seeks to adopt the euro in 2014, Prime Minister Valdis Dombrovskis said.
“Without ratification of the fiscal compact, I think euro zone accession could be complicated,” he said by phone from Stralsund, Germany, where he is attending a conference, after the 100-member legislature voted 67-29 with one abstention to approve the treaty in a second and final reading.
Latvia, along with neighboring Lithuania, may face a “challenging” inflation outlook that could hamper their convergence with the single currency, the European Central Bank said in a report yesterday. With euro-area nations such as Spain and Italy slipping into a recession after enacting austerity measures to fight the debt crisis, Europe’s economy will fail to grow this year with risks “tilted to the downside,” the Brussels-based European Commission said on May 11.
“Of course we keep our eyes open on the developments in the euro zone,” he said. “We see the situation is quite complicated in Greece and worsening in Spain.”
Should the economic situation worsen in the euro area, Latvia can put off its membership, according to Dombrovskis.
“There is always this possibility, but I hope we won’t need to use this possibility and that the euro zone will work to solve these problems,” Dombrovskis said.