INTERVIEW-Latvia to apply to join euro zone in February

Aleks Tapinsh

RIGA, Dec 18 (Reuters) - Latvia will apply to join the euro

zone in February, its finance minister told Reuters on Tuesday,

confident that it will be accepted and can overcome domestic

opposition.

The Baltic country has embarked on a campaign at home and

abroad to convince a sceptical public to support the move and to

remove any EU doubts that it can thrive inside what is currently

a 17-nation currency bloc.

Latvia is one of the fastest-growing economies in the

European Union, recovering from years of austerity following a

20 percent output drop in 2009 after the global financial crisis

hit.

"We can look at the past three years. Latvia was

predictable. If we look now, we have the fastest economic

growth, but at the same time, the price growth is very

restrained," Andris Vilks, the finance minister, said in an

interview.

"With that, we shouldn't have any negative surprises here. I

think we've earned respect," said Vilks, whose country has been

held up by some as an example to crisis-hit euro zone nations of

how to solve budget deficit problems with political will.

He said Latvia would ask for a European Commission

assessment of its euro readiness in February, the start of the

membership process.

That would pave the way for a recommendation from the

Commission, and from the European Central Bank, on which EU

leaders would have to vote in June next year.

The ECB is expected to be tougher than the Commission, as it

was on Estonia, which adopted the euro in 2011.

But Latvia says it has the right credentials. The

centre-right government slashed spending and hiked taxes after

the crisis to meet the terms of a 7.5 billion euro bailout led

by the International Monetary Fund and European Union.

It successfully completed the bailout programme last year

and this month repaid back the IMF loan in full, early.

"I try to speak with colleagues and assure them, purely

pragmatically, of what we have accomplished in the Baltics. I

don't speak about states that shouldn't be in the euro zone," he

said, referring to comments in July that Greece should quit the

single currency bloc.

Opinion polls show a majority of Latvians against adopting

the euro. No referendum will be held, but strong public

opposition could be a negative signal to other EU states, who

have to make the decision to back Latvia's adoption of the euro.

"I think the situation will improve in the next months

because information will be widely available," he said. The goal

is that people don't associate the crisis in the eurozone with

the currency as a whole, but with a specific country, he said.

Vilks expects Latvia to have a budget deficit close to 1.5

percent of output this year, well below the 3 percent EU target.

Vilks said Latvia needed to borrow $4 billion in 2013-2014

to refinance its bailout and pay principle on bonds due in 2014.

"We can't say at what moment or how this sum will be split.

(Low) interest rates are an important factor in our decision,"

Vilks said. Latvia borrowed $1.25 billion in bonds earlier this

month to repay almost $1 billion to the IMF.

(Reporting By Aleks Tapinsh. Editing by Jeremy Gaunt.)