One Step Closer To The Euro

June 2005
Emerging Europe Monitor: Central Europe & Baltic States;Jun2005, Vol. 12 Issue 6, p11
Country Report
Country Report
The article reports that Latvia moved a step closer to adopting the euro by joining exchange rate mechanism-2 (ERM-2) at the end of April 2005. Participation in ERM-2 for at least two years without devaluing is one of the criteria for eurozone entry. The country aims to adopt the euro in January 2008 but high inflation could cause the target date to be missed. Inflation averaged 6.6% in the 12 months to February 2005, compared with the eurozone reference value of 2.2% over the period. With a fixed exchange rate and policy interest rates already twice as high as those of the European Central Bank, a rate hike could boost capital inflows.


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