Latvia picks up the euro. It won't change much.

Latvia's entry into the Eurozone will not affect exchange rates or monetary policies, Karlsson says.

Francois Lenoir/Reuters
Latvia's Finance Minister Andris Vilks speaks about Latvia adopting the euro at the European Union council building in Brussels, Belgium, on July 9, 2013. Latvia is set to join the Eurozone on January 1, 2014.

While certain people have predicted the end of the euro ever since the trouble in Greece began in late 2009, these predictions have yet to materialize. Not only hasn't it ended, not a single country has exited, with one country, Estonia, in fact joining in 2011 and with Latvia now set to join as well on January 1 next year.

Estonia's and Latvia's entries have/will strengthen the northern German-led faction in the ECB, as they have demonstrated a commitment to sound public finances even in a crisis, also likely making them supporters of the German sound money policies.

However, apart from the influence Latvia will gain in the ECB governing council, this move won't change anything in terms of exchange rates and monetary policy as Latvia has had during a long time a fixed exchange rate against the euro for its currency.

This also means that as the number of euro area countries increases from 17 to 18 (excluding micro states Andorra, Monaco, San Marino and the Vatican as well as Kosovo and Montenegro which have unilaterally adopted the euro without being formal members) the number of EU countries with a national currency with a fixed exchange rate drops from four to three, with the remaining being Lithuania, Bulgaria and Denmark. Of these remaining three, Lithuania seems eager to follow the path of their fellow Baltics and adopt the euro, while Bulgaria and Denmark are content with the status quo of a national currency pegged to the euro.

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