The euro zone embraced tiny Latvia as its newest member on Tuesday (July 09), eager to show that the bloc is not disintegrating while doubts remain about southern Europe's ability to overcome more than three years of crisis.

On January 1, 2014, Latvia will become the second baltic state to adopt the euro after Estonia in 2011.

Finance ministers from the full 28-nation European Union set Latvia's exchange rate at 0.702804 lats to one euro, an irrevocable conversion that cements the country's shift away from Russia two decades after the fall of the Soviet Union.

Latvia will use euro notes and coins from January 1, 2014, hoping that being part of the currency bloc of 330 million people will help trade and attract investment. It follows its fellow Baltic nation Estonia, which joined in 2011 and is expected to be followed by Lithuania in 2015.

Political upheaval in Portugal last week also raised questions over Lisbon's ability to return to borrowing on the markets and leave its bailout.

Much of the euro zone is in its second recession since 2009, with unemployment at record levels, and potential future flashpoints include Slovenia, where banks are saddled with billions of euros of bad loans and which is trying to avoid the misery of another bailout in the bloc.

Presented by Adam Justice