Latvia's leaders and the European Union have hailed the Baltic state's adoption of the euro, amid widespread public fears over possible price rises and the future of the single currency.
As fireworks erupted over Latvia's capital Riga to mark the start of 2014, a new €10 note was pulled from a bank machine by acting prime minister Valdis Dombrovskis, who has been praised by the EU for sticking to painful austerity that restored Latvia to growth after a crippling recession.
The euro is Latvia’s fourth currency in 23 years, following the Soviet rouble; the Latvian rouble, which was introduced after the country regained independence in 1991; and the lat, which came into circulation in 1992, resurrecting the money Latvia used before Soviet occupation in 1940.
For many of Latvia’s two million people, becoming the 18th member of the euro zone is bittersweet: while marking their country’s closer integration with the EU and distancing it further from Russia, it also entails the loss of a currency that was a cherished symbol of sovereignty, and fuels fears of higher prices.
“In all other countries which switched to the euro, prices rose. Most likely, they will rise here as well, which is bad,” said pensioner Oleg Bachurin.
Another Riga resident, Zaneta Smirnova (40) said: “I am against the euro. This isn’t a happy day. The lats is ours, the euro isn’t – we should have kept the lats.”
Pensioner Maiga Majore was more optimistic, saying the euro “can only be a good thing” for Latvia. “To be part of a huge European market is important. All this talk about price rises is just alarmist,” she added.
Surveys suggest that at least half of all Latvians were against euro adoption, and that about two-thirds of them expected it to cause prices to rise.
The monetary switch takes place as Latvia continues to post strong economic figures, but with its people still suffering after several years of spending cuts, layoffs and tax rises.
Analysts estimate the economy grew by about 4 per cent in 2013, following two years in which Latvia outperformed the rest of the EU with expansion of more than 5 per cent.
Brussels says those figures prove the benefit of swingeing austerity measures – equivalent to 16 per cent of gross domestic product – that Mr Dombrovskis pushed through as part of a €7.5 billion bailout programme from the EU and International Monetary Fund.
Latvia applied for the emergency aid after its economy shrank by more than a fifth in 2008-2009 – one of the sharpest contractions on record – as the easy credit that fuelled the "Baltic Tiger" years of stellar growth dried up and Parex, the country's second-biggest bank, collapsed.
While the austerity programme has helped stabilise Latvia’s economy and allowed it to join the euro zone, it has also contributed to a rise in poverty levels, unemployment and emigration.
"Today is a very important day for Latvia, difficult to imagine three or four years ago," said finance minister Andris Vilks.
“Everything is just beginning for Latvia,” he said.
European Commission president José Manuel Barroso sent congratulations to Riga, saying the adoption of the euro was “the result of impressive efforts and the unwavering determination of the authorities and the Latvian people”.
