Latvia has become the 18th member of the European currency union, abandoning its former national currency, the lats. That transition is a milestone for both the Eastern European country and the eurozone.
Initially, all 28 members of the European Union were expected to make the euro their currency. Major European economies — including France, Germany, Italy, and Spain — have joined. But 10 E.U. members, including the United Kingdom, have not.
The United Kingdom sees preserving the separate British pound as essential to maintaining London as a financial center. Adopting the euro, national leaders say, is inconsistent with the economic and political independence from the E.U. and continental Europe that Britain seeks for itself.
For Latvia, though, this looks like a good deal. It should improve the country’s credit and make foreign investment easier. The former Soviet republic joined the E.U. and NATO in 2004. It is firming up its independence from Russia, still one of its larger trading partners.
Latvia was hit hard by the Great Recession. Its unemployment rate rose to 20 percent in 2010, causing Latvia to take a $10 billion bailout from the E.U. and International Monetary Fund. But it projects robust economic growth this year.
Latvia is the first new member of the eurozone since the zone had to pull itself together amid financial crises in Greece, Cyprus, Ireland, and Portugal, and some uneasy creaking in Italy and Spain over the past few years.
Other E.U. members that have not adopted the euro include Bulgaria, Croatia, the Czech Republic, Denmark, Hungary, Lithuania, Poland, Romania, and Sweden. They will watch Latvia’s performance with the euro closely, as they consider their own financial situations.
Joining the eurozone is a country’s individual decision. Although 60 percent of Latvians opposed the shift, the nation’s leaders went ahead anyway. It will soon become clear how the new currency will work out.