“Latvia’s accession to the eurozone is a significant geopolitical step for the country, but not the end of history” says Roberts Zīle, member of the ECR group in the European Parliament from Latvia.

“Latvia’s accession to the eurozone is a significant geopolitical step for the country, but not the end of history” says Roberts Zīle, member of the European Conservatives and Reformists group in the European Parliament from Latvia.

“Among other things, the adoption of the euro by Latvia will help reduce the country’s dependence on Russia as well as improve the stability of the financial sector,” notes Zīle after today’s positive vote at the plenary session on resolution by Burkhard Balz on Latvia’s accession to the eurozone.

“Indeed, the geopolitical dimension alone is important and should not be undermined. Third-countries’ influence is significant and for such a small country like Latvia it is important to be well integrated in Europe.” notes Zīle, adding: “The EU’s rotating presidency by Lithuania was also just started with the country’s president Dalia Grybauskaite warning about Russia’s rising influence in east. The threat is real.”

Mr. Zīle also thinks that this was indeed a good time for Latvia to join the eurozone.

“During the recent financial crisis, Latvia took very bold yet painful steps to solve its economic problems. The government decided to keep our currency’s — the Lat’s — peg to euro and opted instead for the so-called internal devaluation option. Our policy choices have thus been geared towards joining the eurozone. To say no to the euro now when the door is finally open would not only be unwise given the painful measures taken, but would also send a worrying signal to others that our geopolitical priorities have shifted,” says Zīle.

Nevertheless, Mr. Zīle has no illusions about the euro.

“That said, the eurozone per se will not solve many of the problems Latvia is still facing. Because of austerity measures taken unemployment, even though falling, is high while inequality and poverty have increased. At the same time emigration and negative population growth are a worry for the very existence of our nation,” notes Zīle

“What is more, the rising amount of non-resident deposits is a matter of concern given their volatile nature. They contribute to mismatches between the banks’ asset-liability maturity structures and can affect the overall stability of the financial sector as well as create financial liabilities for the government via the deposit guarantee scheme. NRDs also contain a geopolitical dimension as 80-90 per cent come from the CIS countries. In addition, there is also the aspect of money laundering.”

“None of these problems will be solved by the euro — they are the responsibility of the government,” notes Zīle.

“However, it seems that Latvian MEPs from other political groups in the European Parliament do not understand the importance of NRDs and their geopolitical dimension as most of them voted against the ECR group’s amendment to the Balz report on euro adoption by Latvia which said just that — NRDs can also have a geopolitical dimension.”

Despite it all, Mr. Zīle believes the eurozone is a significant step for Latvia that will improve the country’s financial stability: “The moves towards a eurozone-wide banking union coupled with Latvia’s future access to the ESM is in the country’s interests and will help Latvia’s financial sector.”