Finland Times

 

Photo AFP-Lehtikuva.

The changeover to euro means both benefits and obligations for Lithuania, the last of the three Baltic states to join the monetary union in 2015.

     

Lithuanian people, businesses and high officials are favoring the step as indication of deeper Lithuania's European integration which is crucial to further the country's financial stability and competitiveness.

   

Moreover, Lithuania's joining the euro zone completes the whole Baltic region's integration into the monetary union. The country's participation in the euro bloc can also increase the region's stability in the face of increased geopolitical tensions between the West and Russia, high officials admitted.

     

Joining the European single currency "gives a better buffer towards geopolitical tensions," European Economic Affairs Commissioner Jyrki Katainen told reporters in capital Vilnius, where he was taking part in the conference "The Euro in Lithuania: One Market, One Currency, Common Future" this week.

     

"Our European orientation is consistent and irreversible and we are ready, willing and fully prepared for deeper EU integration," Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, said during the event.

     

"Reviving growth, boosting competitiveness, safeguarding financial stability - these are the top three tasks for the euro area today. And, in my view, Lithuania has good potential to contribute to getting ahead in all three directions," he added.

     

Lithuania is one of the fastest growing economies in the EU. After taking into account the impact of the recent trade restrictions due to Russia's embargo on the EU's food imports, the Bank of Lithuania forecasts 2.9 percent real GDP growth in 2014 and 3.3 percent next year.

     

Lithuania, along with its Baltic neighbours Latvia and Estonia, adopts the euro from a strong and sustainable basis. The main macroeconomic indicators of Lithuania are exceeding the pre-crisis level and no major imbalances or cyclical gaps are being observed, Vasiliauskas noted.

     

Lithuania's economic advantages have been noticed by Mario Draghi, the President of European Central Bank, who was attending the conference in Vilnius. According to him, the Baltic states had gone through the painful fiscal adjustment, due to global financial crisis, which was surprisingly welcomed among the populations.

     

"How was it possible? In my opinion, governments (of the Baltic states) were acting decisively and immediately," Draghi said.

     

Consolidation measures were implemented during the peak of the crisis, therefore, societies were convinced it was necessary for pursued result, he noted.

     

"The Baltic states have demonstrated that it is possible to overcome the setbacks, even without devaluation of its own currency," Draghi said.

     

Nevertheless, Lithuania's work in addressing its main economic tasks is not finished with joining the euro zone, officials agree. Staying on the track of financial self-discipline is a key prerequisite for long term success, Vasiliauskas insists.

     

"The euro is not an aim in itself. It only opens a big window for big opportunities. Their realization depends on us," the chief of Bank of Lithuania said.

     

According to Lithuania's Prime Minister Algirdas Butkevicius, euro is important for a small open country which has diverse trade relations with foreign markets.

     

"Keeping the national currency 'litas' would further mean bigger exchange costs and weaker possibilities for Lithuanian producers in the international markets," Butkevicius said.

     

"I really don't expect any negative effects for Lithuania from euro adoption. I see only positive changes, including growing direct foreign investment," Guntram Wolff, Director of Bruegel think tank in Brussels was quoted by Lithuanian business newspaper Verslo Zinios.

     

Rimantas Sadzius, Lithuanian minister of finance, expected better credit rating for Lithuania after euro adoption, which would mean cheaper borrowing for the country. "We are not going to relax, we will continue strict fiscal policy," Sadzius said.

     

Lithuanian people are cautious about adopting euro, nevertheless, they feel fit for the euro, recent polls showed. 90 percent of Lithuanians said that they personally would manage to adapt to the euro while 51 percent thought that their country is also ready for the changeover, according to a Flash Eurobarometer survey published on September 24.

     

Support for the euro was almost unchanged since the last poll in April 2014. 47 percent of respondents now say they are in favour of introducing the euro, while 49 percent are against.

     

However, 50 percent of respondents said that they thought the common currency has had a positive impact on the countries that already use it.

     

Concern about alleged price increase is one among prevailing worries in Lithuania before euro introduction. Businesses had been invited to join governmental initiative on agreeing about transparent and fair changeover to the euro.

     

Lithuania finds itself within touch from the euro which will be introduced on Jan 1, 2015. The Baltic country will become the 19th member of the European currency union.

     

Lithuania's national currency "litas" has been pegged to euro since 2002 at 3.4528 litas to 1 euro. The country's first attempt to join euro zone in 2007 was unsuccessful due to exceeded inflation rate target.

   

Estonia joined euro zone in 2011, and Latvia in 2014.