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Fireworks and fear as Latvia joins eurozone

RIGA--Latvia's Prime Minister Valdis Dombrovskis symbolically withdrew a crisp 10 euro note as fireworks lit up the capital Riga after midnight Wednesday, ringing in the New Year and his country's entry into the troubled eurozone.

“It's a big opportunity for Latvia's economic development,” he said as thousands thronged the city centre, insisting that avoiding excessive debt through “responsible” spending was key to any future success.

While leaders feted the 18th addition to the bloc, the people of this Baltic state bade a reluctant farewell to their cherished lats — seen as a symbol of independence from the Soviet Union — to switch to the debt-mired European single currency.

There is widespread unease in the country about joining a currency union that has seen five of its members forced into painful bailouts since a crippling debt crisis erupted in 2009.

According to a recent SKDS poll, half of Latvians oppose the third currency switch in just over two decades, fearing price hikes and infuriated by the draconian austerity cuts made to get the country into the club.

“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,” Zaneta Smirnova told AFP as the 40-year-old watched ceremonies marking the euro adoption.

Like the crisis-hit eurozone, which expects to limp back to growth some time in 2014, the country of two million people was hit hard by the 2008-9 world financial crisis.

It suffered the world's deepest recession when GDP shrank by nearly a quarter over the two years.

Dombrovskis — who deftly steered Latvia towards the euro — orchestrated a 7.5 billion-euro (US$10.3-billion) international bailout to avert bankruptcy, but at the price of deep austerity cuts.

Known as the “Baltic Tiger” for its explosive growth after winning independence from the crumbling Soviet Union in 1990, Latvia has bounced back well from the crisis.

It topped growth in the EU in both 2011 and 2012 and is set to expand four percent in 2013.

Latvia is “a role model as far as fiscal adjustment is concerned,” European Central Bank chief Mario Draghi told AFP.

And European Commission President Jose Manuel Barroso praised the country's “impressive efforts” and “unwavering determination,” as he welcomed the eurozone's newest member.

Riga's entry comes as the eurozone ends 2013 on a more positive note following years of lurching from crisis to crisis, enduring recession, unemployment and social unrest.

On Tuesday, Spain officially exited its bank bailout program, a day after Greece's prime minister announced it was ready to return to the markets.

Ireland has also put its bailout program behind it and EU leaders stitched together an historic banking union deal in December they hope will end the excesses that brought the bloc to its knees.

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A young person displays euro banknotes after withdrawal in Riga, Latvia on Wednesday, ringing in the New Year with the country's entry into the troubled eurozone. (AFP)

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