International Monetary Fund Managing Director Christine Lagarde said the euro region will have solved some of its problems by the time Latvia joins the currency bloc in 2014.
“The euro zone is experiencing difficulties, and struggling with them, and the time period when Latvia will join the euro zone will be very important,” she said in an interview with Latvian television broadcast late yesterday. “Accession will not happen tomorrow, but after 2013, when part of the problems facing the euro zone will definitely have been solved.” Latvia plans to adopt the euro in 2014.
Lagarde, who was in the Latvian capital on June 5 for a conference on how the Baltic state handled its economic crisis, said euro accession will lower interest rates, reduce currency fluctuations and bolster trade with the euro area.
Latvia completed a 7.5 billion-euro ($9.5 billion) loan program from a group led by the European Union and the IMF in December. Its economy grew the fastest in the EU in the first quarter, advancing 6.9 percent from the previous year, after shrinking by more than a fifth in 2008 and 2009.
Some of the people that left Latvia during the crisis will return as the economy strengthens and provides more jobs, Lagarde said in the interview.
“We have experienced this process in many countries -- that can happen also in Latvia,” she said. “We see that life in your country is improving, we see that the high level of unemployment is constantly decreasing and that means that for Latvia those are hopeful signals.”
About 80,000 people left Latvia, which has lost about a 10th of its population in the last decade, during 2009 and 2010, according to estimates from labor economist Mihails Hazans. The country’s unemployment rate was 16.3 percent in the first quarter, according to a labor force survey.