The Euro Adds Latvia, but Further Growth Is Uncertain

PARIS — Dace Utinane, a doctor at a private health center, frowned during a stroll this week through Riga, the capital of Latvia, as she contemplated her country’s move to become the newest member of Europe’s currency union.

“I don’t like it — the euro is not my money,” said Dr. Utinane, arching an eyebrow. “This has been dictated by people from above. But we’re too small to do something about it and protest against it.”

In the halls of power, European leaders are taking a starkly different view. On Wednesday, as Latvia became the 18th country to join the euro, they promoted it as a sign that the currency union — even with wrenching growing pains that included threats of a breakup — is on a long-term path to achieving its founders’ vision of continued expansion.

“Despite the negative headline of the crisis, the basic promise of peace, prosperity and freedom to travel and work still have their appeal,” said Holger Schmieding, chief economist at Berenberg Bank in London. “So the process of euro enlargement has not come to an end.”

How quickly it will grow is another question. While most of the European Union’s 28 member countries are obliged eventually to ditch their national money for Europe’s single currency, skepticism among European citizens about the euro union is still alive in many corners.

Lithuania is on track to be next in adopting the currency, in 2015. Like Latvia, its neighbor and fellow former Soviet republic, it is eager to link itself to the West, an imperative that has grown starker as Russia seeks to keep a grasp on Ukraine despite recent pro-Western protests there.

After 2015, however, euro zone enlargement is set to slow. In Eastern Europe, several countries have not even taken the first step required for euro membership by entering the exchange rate mechanism, a sort of waiting room. The Czech Republic, Hungary and Poland have all pushed back their target dates for euro zone membership until near the end of the decade in the face of low public support.

Smaller nations, including Romania and Croatia, which joined the European Union last year, have said they are unlikely to adopt the euro until around 2020, partly because their economies cannot quickly meet the criteria. Those include achieving a deficit of 3 percent of gross domestic product and keeping debt to 60 percent of the annual gross domestic product.

Denmark may be one of the next to join. Although the idea was defeated in a national referendum in 2000, a new public vote will be held during parliamentary elections in December 2015. Public support, which improved slightly after euro bills and coins started circulating, plunged again during the euro crisis. Sweden has also not taken the steps required to join, and has shown no signs of doing so.

While European Union member states are required to adopt the euro, citizens can still shoot down membership if a government decides to hold a referendum. In Latvia, the government chose not to hold one, given the negative sentiment revealed in public opinion surveys, and to push the issue through instead.

Around half of Latvians opposed joining the euro, although support rose toward the end of the year. The reluctance was palpable on New Year’s Eve in Riga, where the fireworks and celebrations that illuminated other countries at the moment of euro membership were starkly absent. The only sign that a new currency was coming was in stores, which had begun to post prices in euros alongside lats, the old money.

Part of the reluctance among euro-skeptics, economists say, is the fear of losing a degree of sovereignty and of being liable for supporting other countries should any new crisis break out. Few have forgotten how Estonia, which joined the euro in 2011, was soon called upon to help bail out Cyprus when a banking crisis hit.

The euro’s economic troubles have also damaged the currency bloc’s image and highlighted structural flaws in its foundation that have still not been fully addressed.

Gederts Gelzis contributed reporting from Riga, Latvia.

This article has been revised to reflect the following correction:

Correction: January 1, 2014

An earlier version of this article misstated the names of two people and the title of a third. The doctor in Riga is  Dace Utinane, not Utinane Dace, and the director of a furniture company in Jaunpiebalga is Normunds Bremers, not Bremers Normunds. Simon Tilford is deputy director the Center for European Reform, not its chief economist.