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Eurozone membership to slow after Latvia joins

Eurozone membership to slow after Latvia joins
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The eurozone continues to expand – albeit slowly – despite the single currency bloc’s economic troubles. Latvia became the latest country to join at the start of the year.

But the euro’s tarnished image is one reason why opinion polls show around half of Latvians didn’t want to adopt it.

Reasons given included fear of losing sovereignty and having to support other eurozone countries if there were a new crisis, as well as worries that prices would go up.

The euro adoption follows years of harsh austerity after Latvia suffered the EU’s worst recession.

It is now arguably in a better state than much of the rest of the bloc, with economic growth this year forecast by the European Commission to be 4.1 percent compared with the eurozone’s 1.1 percent.

Unemployment in Latvia is set to be 10.3 percent of the workforce in 2014, with the eurozone average predicted to be 12.2 percent.

Latvia joined as the single currency bloc marked its 15th anniversary, and the euro is now used by 333 million Europeans.

But the neighbouring Baltic state of Lithuania is the only remaining EU
country showing much enthusiasm for euro admission. It is due to join in 2015.

Other former Soviet bloc nations such as Poland, the Czech Republic and Hungary are reticent about currency union.

Within Latvia, businesses are keener that the general population because they expect borrowing costs to be lower and investment to increase. They also see export opportunities within a eurozone that is showing signs of recovery.

That was reinforced by figures just released for December which reveal manufacturing in the region grew at the fastest rate since mid-2011.

New orders piled in at the fastest pace since April 2011, and a near two-year stretch of job cuts across eurozone factories almost came to an end last month.