By Aija Braslina
RIGA (Reuters) - Latvia got the go-ahead on Wednesday to adopt the euro from 2014, crowning the Baltic state's emergence from an economic crisis and signaling to the world that the often-beleaguered euro zone is still expanding.
Although fewer than two in five Latvians like the idea, their country will become the 18th member of the single currency bloc from the start of next year. European Union finance ministers are due to formally endorse the European Commission's positive recommendation at a meeting on July 9.
The euro, launched as notes and coins on January 1, 2002, is now used by around 330 million people and has become a major reserve currency.
"We have concluded that Latvia is ready to adopt the euro on January 1, 2014," EU Economic and Monetary Affairs Commissioner Olli Rehn told a news conference in Brussels.
After three years of a sovereign debt crisis that cast doubt on the survival of the euro and forced governments to agree on fundamental changes to the way economic policy is formulated, Latvia's bid to join is politically welcome.
Still, the country will be the poorest in the euro zone and none of the major eastern European economies, such as Poland or the Czech Republic, have set dates for a move to the euro.
"Latvia's desire to adopt the euro is a sign of confidence in our common currency. Those who predicted a disintegration of the euro ... were simply wrong," Rehn added.
To adopt the euro, Latvia had to meet five entry criteria: low inflation and long-term interest rates, a stable exchange rate and low public debt and deficits.
The European Central Bank, which does not have any formal say on whether a country can join, but has to issue an opinion, also gave a positive assessment. But it warned that high foreign deposits in its banks were a risk to stability.
TOUGHEST IN THE EU
Latvia, with just 2 million inhabitants, was plunged into economic turmoil when the 2008 global financial crisis popped a real estate bubble and toppled one of its leading banks. It lost about a fifth of economic output and was forced to take a bailout from the International Monetary Fund and European Union.
The centre-right government hiked taxes and cut wages in one of Europe's harshest austerity programs, which foreshadowed measures imposed on crisis-hit euro zone states.
Latvia kept its lat currency pegged to the euro throughout the crisis, although some economists, including Nobel Laureate Paul Krugman, said a devaluation would have eased the pain.
Estonia, which adopted the euro in 2011, and Lithuania, which wants to switch in 2015, followed similar policies.
"Latvia's experience shows that a country can successfully overcome macroeconomic imbalances, however severe, and emerge stronger from the crisis with a solid recovery," Rehn said, noting that it will have the strongest economic growth in all of the 27-nation EU this year.
Latvian Prime Minister Valdis Dombrovskis said switching to the euro from the lat currency would foster growth, bring increased foreign investment and upgrades of its credit ratings.
Dombrovskis has pressed on with euro entry even though polls show most Latvians are opposed to switching currencies.
"Latest polls show 38 percent support for euro adoption," Dombrovskis told reporters. "We believe we might reach a majority supporting euro adoption at the moment when Latvia introduces the euro. Government has to work on that."
But people remain skeptical due to attachment to the lat, fears the euro zone is wobbly and that its introduction could lead to price rises in a country where many people remain poor.
"The lat is one of our national treasures. We could travel abroad and boast that the lat has a higher value than, for example, the euro," said Arvis Krastins, 23, a design student, referring to the fact that the lat is worth just over one euro.
The three Baltic states regained their independence from the Soviet Union in 1991 after spending nearly 50 years under Moscow's domination. Entering the euro zone is part of a shift from Russia's orbit after European Union and NATO entry in 2004.
(Writing by Jan Strupczewski and Patrick Lannin; editing by Stephen Nisbet)