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WorldFebruary 3 2014

Latvia: in the eurozone but not out of trouble

With a deadline looming for the privatisation of state-owned Citadele, and the country's accession to the eurozone likely to squeeze profits in the banking sector, 2014 looks set to be a year of challenges for Latvia.
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Latvia: in the eurozone but not out of trouble

Five years ago it was the worst performing economy in the world, with gross domestic product contracting by 18% in 2009. In 2014, 10 years after joining the EU, it became the eurozone's newest member. But Latvia's turbulent fortunes do not end here, and the country's bankers are looking to the future with a mixture of hope and apprehension.

The country's currency, the lat, had been pegged to the euro for almost a decade in preparation for the adoption of the single European currency. When the financial crisis hit in 2009, many predicted that the lat would be devalued, but Latvia kept its fixed exchange rate at the cost of a severe economic downturn. Joining the euro removes uncertainty about the fate of the currency and puts paid to any future speculation about devaluation.

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