Latvia has just been given the green light by the European Commission to enter the eurozone. What Latvia has achieved in the period since it was rescued by the international community in 2009 is nothing short of remarkable. This achievement is now used as an example for the countries in southern Europe of how to restore growth and competitiveness.
This is often couched in the austerity vs stimulus debate. But this is misleading for the real lesson from Latvia is about how consistent structural reform improving the workings of product and labour markets can enhance an economy’s ability to respond to adversity.
Add to this a remarkable resilience of its population and an economically more favourable neighbourhood in the Nordic region, and you have the core explanation for Latvia’s success.