Analytics, EU – Baltic States, Financial Services, Latvia, Legislation

Yesterday's discussions indicated the committee's support in principle for the adoption of the euro in Latvia. The committee's official vote will be held on June 24. The report expresses support for the adoption of the euro in Latvia on January 1 next year. The European Parliament will vote on the report at a plenary session that will start on July 1. The matter will most likely be debated on July 2 and voted upon on July 3.

As reported, this past May, Balz visited Riga to meet with government officials, representatives from the central bank, financial supervisors, the financial sector, social partners as well as representatives of citizen's initiatives and the opposition that have been rather skeptical towards the euro introduction in Latvia.

The report notes that Latvia fulfils the criteria as a result of determined, credible and sustainable efforts by the Latvian government and the Latvian people.

The report says that in its 2013 Convergence Report the European Central Bank expressed some concern in regard to the long-term sustainability of Latvia's economic convergence. Those concerns need to be taken seriously but they do not change the overall positive assessment on the adoption of the euro by Latvia, says the report.

The report calls on the Latvian government to maintain its prudent fiscal policy stance, together with its overall stability-oriented policies, anticipating potential future macroeconomic imbalances and risks to price stability.

Balz also calls on the Latvian government and authorities to communicate more actively with the Latvian people in order to ensure more public support for euro adoption, and to continue their information and communication campaign with the aim of reaching all Latvian citizens.

Likewise, the report calls on the Latvian government to address structural deficiencies in the labor market with appropriate structural and educational reforms.

The draft report acknowledges the stability of the Latvian banking sector during the present crisis, noting that Latvia has a long tradition in servicing non-resident banking clients. The report welcomes the exceptionally stringent regulation of Latvian banks active in the non-resident deposits business and calls on the Latvian authorities to ensure that a strict supervision of those banks as well as adequate risk management measures are maintained.

The report calls on the Latvian authorities to maintain the present course of practical preparations to ensure a smooth changeover process and that the introduction of the euro is not used for hidden price increases.