Latvia should join the Euro on 1 January 2014, recommends the Economic and Monetary Affairs Committee in an opinion voted on Monday. The opinion praises Latvia's record and efforts to date, but also says it needs to strengthen its national economic governance structures and reduce its shadow economy. Latvia's heavy dependence on energy imports poses price stability risks, it adds.

The opinion, authored by Burkhard Balz (EPP, DE), and approved with 35 votes in favour, one against and two abstentions, follows up on the European Commission's positive recommendation of 5 June. The committee's opinion commends the "credible and sustainable efforts by the Latvian government and people", but also warns that reforms must not slow down.

The Latvian government needs to do more to remedy structural deficiencies in the labour market and to reduce poverty and growing income inequality, say MEPs It should also do more to ensure that Latvian banks are sound, in particular by stepping up supervision of banks active in non-resident deposit business, they add.

The opinion notes that Latvia's price stability is "very dependent" on commodity prices, particularly of energy. The problem is compounded by the fact that Latvia imports much of its energy needs from a single source and an effort should be made to remedy this, the text adds.

Next steps

The European Parliament plays a consultative role in scrutinising the fitness of prospective Eurozone countries. Parliament as a whole is likely to endorse the committee's recommendation at next week's plenary session and EU finance ministers are expected to give their green light on 9 July.