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BRUSSELS, January 16, 21:48 /ITAR-TASS/. Latvia’s transition to the euro has been successful, the European Commission said in a statement on Thursday, January 16.
“No major problems were encountered and banks, post offices and retailers coped well with the extra workload caused by the changeover process and the parallel handling of two currencies,” the statement said.
The amount of euro cash in circulation exceeded the amount of circulating lats cash (value in euro) on January 10, 2014. According to a Commission survey, on January 14, 2014, more than nine out of ten citizens made cash payments in shops in euro only. All customers were getting their change in euro. Nearly three out of four citizens polled said they carry only euro cash in their wallets.
Latvia has made a successful transition to the euro from January 1, 2014. Prime Minister Valdis Dombrovskis also welcomed the transition to the single European currency. “We have to recognise the fact that the introduction of the euro went according to plan for the banking sector, trade, settlements and cash exchanges. On the whole, we can say that the transition was successful,” he told Latvian radio.
On the night from December 31, 2013 to January 1, 2014, almost six billion lats were converted to 8.5 billion euros at the official exchange rate. During their first day in the Eurozone, Latvians withdrew 3.26 million euros from automatic teller machines (ATMs) and they also actively exchanged lats for euro in banks. No big lines have been seen so far. At the same time, Latvians prefer to pay for goods and services in the national currency.
On January 1, the Bank of Latvia started changing unlimited amounts of lats into euro at the official conversion rate (1 EUR = 0.702804 LVL) for an unlimited period of time and free of charge. Commercial banks will provide unlimited cash exchange services free of charge until June 30, 2014 and post offices until March 31, 2014.
Nearly all ATMs in Latvia distributed euro banknotes within the first 30 minutes of January 1, 2014. To facilitate the process, some banks extended business hours. On the first day of the new year, 22 branches of the three largest banks were open during the afternoon. Several banks will deploy additional staff for cash operations in branches during the dual circulation period.
With the euro successfully introduced in Latvia, the number of European Union (EU) countries using the single European currency has increased to 18, thereby raising the number of Europeans sharing the currency to some 333 million people.
“On behalf of the Governing Council of the European Central Bank (ECB), I welcome this further enlargement of the euro area. Latvia has earned its position as an integrated part of the Economic and Monetary Union”, Mario Draghi, President of the ECB, said.
European Commission President Jose Manuel Barroso welcomed Latvia as the eighteenth member of the euro area. “This is a major event, not only for Latvia, but for the euro area itself, which remains stable, attractive and open to new members. For Latvia, it is the result of impressive efforts and the unwavering determination of the authorities and the Latvian people. Thanks to these efforts, undertaken in the aftermath of a deep economic crisis, Latvia will enter the euro area stronger than ever, sending an encouraging message to other countries undergoing a difficult economic adjustment. On behalf of the European Commission and myself, I offer my sincere congratulations to Latvia and best wishes for the future,” he said.
Olli Rehn, Vice-President of the European Commission responsible for Economic and Monetary Affairs and the Euro, also welcomed Latvia to the euro. “Your efforts have paid off and your country's strong economic recovery offers a clear message of encouragement to other European countries undergoing a difficult economic adjustment. Joining the euro marks the completion of Latvia's journey back to the political and economic heart of our continent, and that is something for all of us to celebrate,” he said.
Following the adoption of the euro by Latvia, Latvijas Banka, the national central bank of Latvia, becomes a member of the Eurosystem, the central banking system of the euro area, which comprises the ECB and, as of today, the 18 national central banks of the EU Member States that have adopted the euro. In accordance with the Statute of the European System of Central Banks and of the European Central Bank, Latvijas Banka has paid up the remainder of its contribution to the capital of the ECB and transferred its contribution to the foreign reserve assets of the ECB.
The integration of Latvian monetary financial institutions (MFIs) into the euro area banking system on January 1, 2014 was already taken into account in the publication of the euro area liquidity needs and the benchmark allotment on December 27, 2013. Latvian counterparties of the Eurosystem will be able to participate in ECB open market operations announced after January 1, 2014.
There was a dual circulation period of two weeks (ending on January 14, 2014), during which the two currencies circulated alongside each other in order to allow for a progressive withdrawal of Latvian lats. When receiving a payment in lats, the change was given in euro.
Prices have been displayed both in lats and euro since October 1, 2013 and this rule will apply until June 30, 2014. In order to address consumers’ concerns about price increases and abusive practices in the changeover period, a “Fair Euro Introducer” campaign was launched in July 2013. It calls on businesses (e.g. retailers, financial institutions, internet shops) to commit not to misuse the changeover for their own profit, to respect the changeover rules and to provide the necessary assistance to their clients.
In June 2013, the European Commission concluded that Latvia met the criteria for adopting the euro. In July 2013, the EU finance ministers took the formal decision opening the way for Latvia’s adoption of the euro.
Thereafter, Latvia started preparing the changeover to the euro by implementing its national changeover plan, providing all the details for the organisation of the introduction of the euro and the withdrawal of the lats.