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Latvia's Inflation Hurdle to EMU Entry Dec 04

  • ID: 1833821
  • December 2004
  • Region: Latvia
  • Standard & Poors
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The authorities in the Republic of Latvia (A-/Stable/A-2) are targeting Jan. 1, 2008, as the date for adoption of the euro. The expectation of European Economic and Monetary Union (EMU) membership is an important factor behind the equalization of foreign and local currency ratings on Latvia, since eventual entry into the Eurozone will significantly reduce the sovereign's vulnerability to balance-of-payments pressures. Yet, inflation is currently running well above the Maastricht criterion for EMU convergence. Absent support for the ratings from other factors, if difficulties in meeting the inflation criterion were to delay Latvia's adoption of the euro substantially, this could slow rating improvements or give rise to downward pressure on the foreign currency ratings on the sovereign. Given that the...

Companies mentioned in this report are:
- Latvia (Republic of)

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- Latvia (Republic of)

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