Latvia to Join the Euro

 Latvia will remarkably become the 18th Euro zone member. This decision is understandably highly unpopular, with the majority of the Latvians against it, with membership in a single currency being a major cause for depression in many European countries.
   It is difficult to understand  the attraction of joining the Euro in the current climate. But the Latvian government seem to feel the risks are worth the benefits of the Euro. An underlying motive must be a desire to join up with Europe and move away from Russia and the East. In 2012, Latvia saw GDP growth of 4.5%, well above the 0.6% GDP growth in the euro zone. The country’s public debt amounts to 44% of GDP compared with 82% for Germany, while the budget deficit came in at 2.7% of GDP in 2012 compared with  7.3% in Spain,  So why join the Euro?
         Latvia believes in the long run the Euro will bring their economy more stability and provide a much needed economic boost. A major benefit of being part of a single currency is reduced uncertainty. This removes the risk associated with investing and thus firms can increase the productive capacity of the economy and provide more jobs through this investment. In addition, for consumers prices tend to fall. The price transparency of a single currency means it will be easier to compare prices in different European countries because they would all be in Euros. This enables firms to source cheaper raw material and consumers to but cheaper good.  Furthermore, the ECB is committed to maintaining low inflation in the Euro zone , however some question whether this focus is too central and the aim to maintain low inflation may just slow down growth.
     There are many issues that surround Latvia joining the Euro. Latvia's ability to maintain competitiveness over the long term has been questioned. Also, some feel Latvia will be constrained by ECB monetary policy which is more concerned with low inflation in Germany than boosting economic growth. Latvia  may also struggle to cope with a common monetary policy. To successfully become integrated with the Euro countries there has to also be some degree of economic convergence, after the criteria. With not much convergence  between Latvia’s economy and Central Europe ,will this only spell disaster?