Latvia's top economic brass presented its credentials for joining the Eurozone to the EP Economic and Monetary Affairs Committee on Tuesday. MEPs' questions focused on the sustainability of Latvia's impressive turnaround, how social policy needs could be better addressed and banking.
Finance minister Andris Vilks stressed that the key factor in Latvia's economic turnaround was the speed with which reforms had been implemented early on in the restructuring phase. He also said that the fact that a successful country wanted to join the Eurozone was a strong sign of confidence in the Euro project.
Central bank governor Ilmars Rimsevics stressed that Latvia could achieve even more stability as a Eurozone member, since it would be less open to speculative attacks.
Some MEPs asked whether Latvia could sustain its low inflation rate and strong growth prospects, whereas others asked about its employment and social cohesion prospects.
Latvia's representatives replied that its numbers were indeed sustainable and that growth was no longer "built on a bubble". Unemployment would hit single-digit figures by summer and social cohesion proposals such as doubling the minimum wage (currently around €300) would be a top priority in next year's budget, they added.
Some MEPs asked about levels of popular support for the Euro in Latvia, given that it had yet to emerge from the Eurozone.
Mssrs Vilks and Rimsevics assured MEPs that there was popular support for the Euro, and predicted that an absolute majority would be on board by summer. They argued that for a small, open economy, joining the Euro would always be useful and that waiting to join until a total calm was not in the interests of such a small economy.
MEPs picked out banking as a sector where more work could be needed and sought reassurances on its strength and sources of capital. MEPs questioned the Latvian banking sector's links to the Russian and Cypriot markets in particular. Mr Vilks assured MEPs that the banks were well-recapitalised and Mr Rimsevics stressed that they were not "living on foreign deposits".
Latvia will ask the European Commission to draw up a "convergence report". The European Parliament will meanwhile draft its opinion on Latvia's suitability to join the Eurozone. Parliament's rapporteur is Burkhard Balz (EPP, DE).
In the chair: Sharon Bowles (ALDE, UK)