Latvia’s appetite for the euro wanes

With around six weeks left until Latvia becomes the 18 country to join the European Union (EU), support for adopting the euro wanes in the Baltic state amid the stresses of unemployment and Russia’s influence.

The SKDS survey, released on Wednesday, polled 1,000 Latvians on their attitude towards adopting the euro.

The support for keeping the traditional lats currency had grown from 52% in September to 58%, as support of the euro has fallen from 24% to 20%.

Latvia’s large public awareness campaign introduced the potential effects of the euro to Estonians, and shops began to introduce dual pricing in the lead up to the switchover on the 1st of January 2014, but neither measure is causing the desired effect.

Public perception

Latvia’s adoption of the euro may encourage investment and reduce borrowing costs.

In addition, the country’s entry into Europe’s single currency is seen as a symbolic step into the West for the former Soviet republic, which is still heavily dependent on Russia for energy.

Yet locals remain unimpressed.

Loyal to the Latvian lats, the public suspect the euro will raise the price of goods and services – as it did in Estonia across the border.

On a governmental level, officials are more focused on uniting separate lighting, sewerage and water systems which serve the country.

In addition, local unemployment stands at a rate of around 12%, leaving many locals to wonder how the euro is supposed to solve this conscientious issue.

The Russian influence

The potential subversive influence of Russia has also surfaced, with Moscow stepping up trade and diplomatic pressures on the nation.

Latvia is seen by many EU policymakers as an example of the positives of austerity.

Faced with the global financial crisis, Latvia refused to devalue its currency, instead favouring a policy of spending cuts and redundancies.

Whilst the measures effectively wiped out a fifth of the country’s gross domestic product, public debt is now manageable at 41% (therefore below the EU upper threshold of 60%), and the country is now the EU’s fastest growing economy, expanding at a rate of 5.5% in 2012.

So whilst the EU, for the most part, shows a positive attitude towards the fiscally prudent Latvia joining its ranks, some say the country is a “problem child,” and a playground for Russia’s oligarchs where foreign money accounts for half of all bank deposits.

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