The effects of the Global Financial Crisis in Europe were exacerbated by the European Sovereign Debt Crisis which itself was triggered by Greece fudging its books when joining the Euro in the first wave. The concern was that Greece, and subsequently Ireland, Portugal, Spain, Italy and Cyprus would be unable to meet their responsibilities of public debt through the money markets, pushing rates up to unacceptable levels which forced Greece, Ireland Portugal, Cyprus and, partially, Spain to seek international bailout funding. At the height of the crisis, many commentators thought that we were seeing the end of the Euro or, at the very least, that Greece (and some of the other “southern” economies) would be forced to leave the single currency. In the end, the 17 members of the Eurozone have weathered the storm and brought the currency into calmer waters – although treacherous currents still could get the unwary into trouble.
The Eurozone nations have put mechanisms in place which are designed to build confidence that another banking storm in Europe would not be anything like as devastating and strides have been made towards greater banking union which many see as essential to the long-term viability of the currency.
The Eurozone has expanded to 18 members with the accession of Latvia at the start of 2014. The government hopes that by joining the single currency that the nation’s credit rating will rise (making government borrowing cheaper) and attract inward investment and create new jobs. It is also suggested that by adopting the Euro, Latvia will further distance itself from Russia. Until the break-up of the Soviet Union, Latvia was a part of the communist bloc and still has a large population of ethnic Russian nationals.