Latvia Set To Become 18th Member Of Eurozone

The euro remained steady at $1.30 on Tuesday morning ahead of the European Commission's expected approval of Latvia's eurozone membership.

The small Baltic country faced one of the region's toughest austerity reform programs in 2009 after a crisis depleted nearly a fifth of its GDP, but is expected to have met all of the eurozone's membership requirements.

According to Reuters, Latvia has lowered its budget deficit to 1.2 percent of GDP, well below the 3 percent required to adopt the single currency. The nation has pegged its currency to the euro since it became a part of the EU in 2004, a process that involved painful spending cuts, tax hikes and internal devaluation. Latvia boasted the fastest economic growth in the region by growing 1.3 percent during the fourth quarter of 2012; but the small eastern European nation still ranks among Bulgaria and Romania as one of the poorest EU countries.

EU officials have said Latvia will be given the green light for membership on Wednesday when the European Commission publishes its report which is expected to show that the Latvian economy meets the criteria for membership.

Following the Commission's report, the European Central Bank will have the opportunity to evaluate Latvia's potential before EU leaders approve the decision at a summit at the end of June. The decision will be made final once the EU finance ministers approve the accession at their July meeting.

EU officials are hoping Latvia's decision to adopt the single currency will indicate to the markets that the euro is growing rather than teetering on the brink of destruction. In Latvia, there are mixed feelings about adopting the common currency.

On one hand, politicians see the euro as less risky than the lat and want to strengthen the nation's relationship with Western Europe in order to reduce their dependency on Russia. However, polls of the Latvian population show most are worried about rising prices and a loss of independence.

BY Laura Brodbeck