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Latvia eyeing euro entry despite crisis: prime minister

23 May 2012, 17:21 CET
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(BRUSSELS) - Latvia intends to join the eurozone in 2014 despite the debt crisis, hoping it will bring an element of economic stability to the country, Prime Minister Valdis Dombrovskis said on Wednesday.

In an interview with AFP ahead of a meeting of EU leaders to thrash out possible ways to bolster growth in the debt-mired eurozone, Dombrovskis said Latvia was "on track" to meet the entry requirements to adopt the euro.

"We set this target several years ago and ... the intention is still to join the eurozone on January 1, 2014," he said.

He conceded that reservations had been raised, given the debt woes that have pitched the 17-nation zone into the most serious crisis in the bloc's history and said Latvia had studied the euro entry experience of neighbour, Estonia.

"Despite the crisis, it also served as a positive signal of financial and economic stability in Estonia, and we expect a similar effect in Latvia," he said.

Estonia became the 17th and latest member of the eurozone when it gave up the kroon on January 1, 2011.

Dombrovskis said he did not expect a negative impact on Latvia's small economy. Rather he said it would "help attract investments, and actually reduce various transaction costs on currency exchanges."

"Our currency is already fixed to the euro anyway, so why not join?" he said.

Latvia will have to meet stringent entry criteria -- for example keeping public deficits below the EU target of three percent of gross domestic product -- and Dombrovskis said it was flaunting such rules that had sparked the crisis.

"Eurozone countries have also to follow their own rules," he insisted.

"Currently countries outside of the euro have to fulfill the Maastricht criteria otherwise they are not allowed in," he said, referring to the strict conditions laid down for entering the club.

"But ... we know that eurozone countries have extensively abused the rules and not followed the Maastricht criteria themselves, which has led to this crisis," he added.

Turning to the summit, likely to be dominated by fears over Greece leaving the eurozone and a clash over the best medicine for the crisis, Dombrovskis appealed to Athens to stick to its promises.

"Greece has to play by the rules of the game and has to deliver on its commitments. If you say no to austerity, the question is who is going to finance your budget?" he stressed.

"By just denouncing the bailout package, you just make the financial markets even more scared and you just worsen the situation," he warned, referring to 237-billion-euros ($303 billion) of aid for the recession-wracked country.

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