Latvia Meets All Terms for 2014 Euro Adoption, Premier Says

Latvia, which is seeking to become the 18th country to adopt the euro, meets all conditions for the switch next year, Prime Minister Valdis Dombrovskis said.

The Baltic nation is ready to be evaluated on its preparedness to become part of the currency union, Finance Minister Andris Vilks said today. The Cabinet will decide March 4 on an application for a report that will deliver the European Union’s verdict on whether the country meets the terms, he said. They spoke at a conference in the Latvian capital, Riga.

“It looks like they are pretty set,” Mohammed Kazmi, a London-based economist at Royal Bank of Scotland Plc., said by phone today. “Inflation has come down, the budget deficit has been reined in, the peg has been maintained. On all those fronts, it looks like they are on track to adopt the euro in 2014. It’s going to be a further boost to investor confidence.”

With the euro-region debt crisis abating, the EU’s eastern members are reviving their bids to join the currency. Latvia’s Baltic neighbor Lithuania plans to seek euro adoption in 2015 and Poland has also reiterated plans to make the switch later. In the former communist east, Slovenia, Slovakia and Estonia are already using the euro.

The yield on Latvia’s government bonds due 2018 was down one basis point at 2.08 percent by 4:27 p.m. in Riga. It has plummeted from 4.75 percent a year ago.

Inflation, Growth

Latvia’s inflation rate will drop to 1.9 percent this year and climb to 2.2 percent in 2014, the European Commission, the EU’s Brussels-based executive, said in a report today. Still, the core inflation rate, which strips out the most volatile items, is rising toward the headline number on higher wages and employment, the commission said.

The economy will grow 3.8 percent this year and 4.1 percent in 2014, the commission said. “Robust” economic growth will cut the budget deficit to 1.1 percent of gross domestic product this year and 0.9 percent in 2014, according to the report.

Latvian support for adopting the euro rose 2 percent on the month to 33 percent in January, the polling company TNS said Feb. 11. The survey showed that 63 percent of respondents oppose joining the euro, down from 66 percent in the December poll. The Jan. 9-28 poll surveyed 1,012 people and didn’t show a margin of error.

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