Report from the Commission to the European Parliament and the Council. Convergence report 2013 on Latvia (prepared in accordance with Article 140(1) of the Treaty on the functioning of the European Union at the request of Latvia)

Article 140(1) of the Treaty on the Functioning of the European Union (hereafter TFEU) requires the Commission and the ECB to report to the Council, at least once every two years, or at the request of a Member State with a derogation, on the progress made by the Member States in fulfilling their obligations regarding the achievement of economic and monetary union. The latest Commission and ECB Convergence Reports, relating to all Member State with a derogation, were adopted in May 2012.

This report has been prepared in response to a request of Latvia, submitted on 5 March 2013. A more detailed assessment of the state of convergence in Latvia is provided in a Technical Annex to this report.

The content of the reports prepared by the Commission and the ECB is governed by Article 140(1) of the TFEU. This Article requires the reports to include an examination of the compatibility of national legislation, including the statutes of the national central bank, with Articles 130 and 131 of the TFEU and the Statute of the European System of Central Banks and of the European Central Bank (hereafter ESCB/ECB Statute). The reports must also examine whether a high degree of sustainable convergence has been achieved in the Member State concerned by reference to the fulfilment of the convergence criteria (price stability, public finances, exchange rate stability, long-term interest rates), and by taking account of other factors mentioned in the final sub-paragraph of Article 140(1) of the TFEU. The four convergence criteria are developed in a Protocol annexed to the Treaties (Protocol No 13 on the convergence criteria).

The economic and financial crisis has, in general, exposed gaps in the current economic governance of the Economic and Monetary Union (EMU) and showed that its existing instruments need to be used more fully. The present examination takes place within a context of the reform of EMU governance, which was undertaken over the past three years with the aim of ensuring a sustainable functioning of EMU. The assessment of convergence is thus aligned with the broader "European semester" approach which takes an integrated and upstream look at the economic policy challenges in ensuring fiscal sustainability, competitiveness, financial market stability and economic growth.

The key innovations in the area of governance reform, reinforcing the assessment of each Member States' convergence process and its sustainability, include inter alia the strengthening of the excessive deficit procedure by the 2011 reform of the Stability and Growth Pact and new instruments in the area of surveillance of macroeconomic imbalances. In particular, this report takes into account the assessment of the 2013 update of Latvia's Convergence Programme and the findings under the Alert Mechanism Report of the Macroeconomic Imbalances Procedure.

EUR-Lex: COM(2013)341: Follow the progress of this report through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2013:341:FIN

EUR-Lex: SWD(2013)196: Technical annex http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2013:196:FIN

ESO: Background information: Commission concludes that Latvia is ready to adopt euro in 2014 http://www.europeansources.info/record/press-release-commission-concludes-that-latvia-is-ready-to-adopt-euro-in-2014/

---