"Latvia has overcome the 2008 crisis by working very hard, painfully, but in the end successfully, on its budget consolidation"
- Burkhard Balz, member of the European Parliament
European finance ministers have approved Latvian accession in the Eurozone on Tuesday, suggesting it will become the 18th member on January 2014. Finance ministers also stressed out that it can be difficult to enlarge the Eurozone, while it is in the longest-ever recession and still struggling to support cash-strapped members, such as Greece and Portugal. EU ministers have also approved the exchange rate at 0.702804 lats to one Euro. Latvia is set to become the second Baltic country that adopts the single currency, after Estonia did so in 2011.
With a relatively small population of about 2 million, the country was hit hard by the 2008 financial crisis, and together with a slowdown in capital flow and weak global performance, Latvian gross domestic product plunged 20.5% from 2007 to 2010. Since 2005 the Latvian currency, the Lats, has been pegged to the Euro, after the country joined the European Union. Recent data showed that Latvian economic output expanded 1.4% during the first quarter of this year, acceleration from the average of 1.16% from 1995 since 2013. This is one of the highest GDP growth rate across Europe, and it was supported mostly by expansion in consumption and credit.
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