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Baltic

Latvia becomes the 18th member of the eurozone

Latvia has become the 18th member of the euro currency bloc. The EU approved its bid in the summer after the Baltic nation bounced back from recession to record impressive growth.

Latvia adopts the euro

Latvia's Prime Minister Valdis Dombrovskis withdrew a 10 euro note as pyrotechnics lit the sky above Riga shortly after midnight on Wednesday. The premier promised that the introduction of the currency would open up a new period of economic progress.

"It's a big opportunity for Latvia’s economic development," said Dombrovskis, stressing that avoiding excessive debt through "responsible" spending was key to any future success. "It (the euro) is not an excuse not to pursue a responsible fiscal and macroeconomic policy," he said.

European Commission President Jose Manuel Barroso welcomed Latvia's membership in a statement. "This is a major event, not only for Latvia, but for the euro area itself, which remains stable, attractive and open to new members," he said.

ECB Central Bank chief Mario Draghi called Latvia " a role model as far as fiscal adjustment is concerned," in an interview with the news agency AFP.

Despite the fireworks and flamboyance, there remains widespread unease in Latvia about joining the single currency. As the country's post -Soviet currency, the lat was much-cherished as a symbol of independence from Moscow. Meanwhile, there are mixed view about just how much the outlook for the euro has recovered on international currency markets.

A real estate bubble during the financial crisis of 2008 and 2009 threw Latvia into recession. In order to avoid bankruptcy, the country's prime minister secured a bailout from the European Union and the International Monetary Fund (IMF) worth 7.5 billion euros ($10.23 billion) and also steered Latvia toward deep austerity measures. The move was credited with the country's five-percent economic growth recorded for the 2011-2012 fiscal year, the top growth rate in the European Union at the time.

One in four fear euro

The introduction of the new currency comes some two decades after Riga adopted the lat and has concerned some in Latvia of increased foreign influence on the Baltic country's economy. Moreover, a 5 percent jump in inflation in neighboring Estonia, which switched currencies in 2011, has raised fears that the euro could cause more harm than good.

SKDS polls taken in December indicated that disapproval of the new currency had dropped slightly among the Latvia's two million inhabitants, falling to about 25 percent.

The ECB has reportedly estimated inflation to expand by roughly 2 percent in Latvia.

Latvia joined the European Union in 2005 and was approved to join the euro currency union in early July. It becomes the 18th member of the eurozone, but only the second Baltic nation and ex-Soviet nation to do so. Lithuania is expected to join the eurozone at the beginning of 2015.

kms/av (AP, AFP)

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