March 5, 2013 / 6:57 PM / 5 years ago

Latvia takes first step towards entering euro area

BRUSSELS (Reuters) - Latvia asked the European Commission on Tuesday to assess its readiness for joining the euro, requesting a report that is expected to be the first step towards joining the group of 17 countries that use the currency.

Latvia's Minister of Finance Andris Vilks gestures during an interview in Riga December 17, 2012. REUTERS/Ints Kalnins

If Latvia meets the entrance criteria, the Baltic state would become the 18th member of the single currency. Finance ministers are expected to take a final decision in July that could see Latvia join the euro from the start of next year.

The European Commission, the EU’s executive, said that it and the European Central Bank would present their conclusions by late May or early June.

The request from Latvian Finance Minister Andris Vilks marks the end of a 15-month preparation period. Latvia says it meets all the entrance criteria including on debt, deficit, inflation, long-term interest rates and having a stable peg to the euro.

Latvia pegged its lat currency to the euro after joining the European Union in 2004. It has stuck with the peg, including through two years of turmoil after the 2008 financial crisis which saw its economy shrink by up to a fifth and sent it to the EU and International Monetary Fund for a bailout in 2009.

It also stuck to the peg despite some economists saying a devaluation would have eased the downturn and could have spared the government painful wage cuts and tax hikes.

Reporting By John O'Donnell

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