independent

Friday 25 April 2014

Nervous Latvians fear price rises as country joins the eurozone

Bar manager Krists Pumpitis loads a cash register with euro coins and banknotes in Riga December 31, 2013. Latvia will enter the euro zone on January 1, 2014. REUTERS/Ints Kalnins (LATVIA - Tags: POLITICS BUSINESS)
Bar manager Krists Pumpitis loads a cash register with euro coins and banknotes in Riga.

Latvia's adoption of the euro today marks the completion of the Baltic nation's journey "back to the political and economic heart" of the continent, according to EU Economic and Monetary Affairs Commissioner Olli Rehn.

The former Soviet block country became the 18th state to adopt the euro when its currency changed from the Lat at midnight. It becomes the newest member of the euro club just a few years after the very ability of the currency to survive was questioned amid the sovereign debt crisis.

Latvia's economy contracted by over 20pc between 2008 and 2009. Its government was forced to slash public sector salaries by as much as 35pc and fire as many as a third of its teachers.

It was bailed out in 2008 in a €7.5bn rescue package.

While the advent of the euro in Latvia has been pitched as a positive for the nation's economy, locals aren't so sure. Half the nation of 2 million people oppose the adoption of the euro, compared to 58pc in October, while 67pc of people surveyed in November said they expected prices to rise by the most since December 2006 once the euro came into use.

Concern that inflation will accelerate is rising even after consumer prices fell 0.4pc in November from a year earlier, the sixth month last year without an increase. The Finance Ministry estimates prices will rise 2.3pc percent this year as the economy expands 4.2pc.

About 83pc of people fear the euro will trigger unwarranted price increases, the European Commission said in a report last month.

Irish Independent

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