Feb. 26 (Bloomberg) -- Latvian public support for adopting the euro may be damped if markets react negatively to Italy’s inconclusive election or Cyprus’s financial woes, said Andris Vilks, the Baltic country’s finance minister.
Public opinion may “fluctuate,” Vilks said in an interview today after addressing the European Parliament’s Economic and Monetary Affairs Committee in Brussels. “It’s a very, very vulnerable situation what could be in Italy and what could be in Cyprus,” he said. “But it doesn’t impact our commitment to join the euro zone.”
Italian stocks and bonds fell, while the cost of insuring the nation’s debt against default climbed to the highest this year, as the country’s election deadlock reignited concern that Europe’s debt crisis will deepen. Latvia is trying to become the 18th euro-area nation in 2014 and has satisfied criteria related to debt, the budget and inflation, according to the government.
Vilks said positive developments in euro countries from Ireland to Spain may compensate for any possible negative fallout from the Italian election.
European Union members outside the single-currency region shouldn’t rush to join until they’re ready structurally and economically, according to New York University professor Nouriel Roubini.
Latvia has gone through economic and financial crisis, avoiding currency depreciation and debt restructuring through international support, Roubini said today in an interview in Sofia before a conference organized and sponsored by Doverie, Bulgaria’s biggest pension provider.
The lesson from Latvia is that it’s “better to wait until a country, both in terms of structural and macro, is ready to join that monetary union rather than rushing,” Roubini said. “I would be more cautious in terms of the timing.”
The number of Latvians strongly or somewhat in support of adopting the euro rose in January to 33 percent, according to a TNS poll published on Feb. 11. Sixty-three percent of 1,012 respondents in the poll said they were very or somewhat opposed to the euro, while four percent were undecided.
In his testimony to EU lawmakers today, Latvian Central Bank Governor Ilmars Rimsevics said 30 percent of Latvians favor adopting the euro, 33 percent are against and up to 35 percent remain undecided.
Asked about the discrepancy between his numbers and the TNS poll, Rimsevics said he was “generalizing” in his testimony.
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