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This article was published on December 31, 2014 at 09:36.
The last change is January 1, 2015 at 11:14.
In Vilnius and other major cities in the celebrations for the adoption of the euro will begin today at noon, twelve hours before the start of the 2015 Games and interactive quiz on the single currency will prepare the way for the entrance of Lithuania – nineteenth Member State – in the Eurozone, while the squares will be on large illuminated cubes. Then, for two days, residents of the capital, Kaunas and Klaipeda will retrace the main stages of the integration of Lithuania into Western Europe.
The geopolitical implications
This is indeed the main key to the adoption of the euro by the Baltic republic. Fixed course, of course, when you consider that all EU states (with the exception of Great Britain and Denmark) are required to adopt the single currency, but only recently welcomed by the growing population: as much as 63% according to the latest Eurobarometer survey, while in June 2013 only 41% were in favor of abandoning the litas to the euro. It is difficult not to see in this change of policy the effect of the crisis Ukrainian and growing tensions with the bulky Russian neighbor, evidenced by the repeated violations of the airspace of Lithuania. Vilnius, in summary, see the entry in the Eurozone as a sign of belonging to the West and a way to mark the distances from the former ruler of Russia.
Rationale shared by the other Baltic countries: Estonia, entered in 2011, and Latvia, which has made its entry into the single currency in 2014. Lithuania, however, had been the first to apply for membership, already in 2006, but had been “rejected” because it did not meet one of the convergence criteria necessary for inflation, too high.
The economic
Since then, this small country (3.5 million inhabitants and a gross domestic product of just € 35 billion) has made tremendous progress, although it went through a dramatic crisis, which in 2009 led to a collapse in GDP of 15% and a peak unemployment of 18 percent. Through a strict consolidation course the government, now led by Social Democrat Algirdas Butkevičius, cut public spending by 10.5% of GDP between 2009 and 2013 and shot down the deficit from 9.3% to 2.6%. The economy in 2011 took a run at an average rate of over 4% per year (in 2014 should grow by 2.7%), the public debt to 41.3% of GDP according to the latest figures from the Commission, is among the lowest in Europe.
The euro: opportunities and risks
One wonders – it did recently with a mixture of understatement and veiled Euroscepticism the British weekly Economist – what incentives can have today Lithuania to join the Eurozone stagnant, except those geopolitical. A list them we thought these days in several interviews Finance Minister, Rimantas Sadzius, and the governor of the Central Bank, Vitas Vasiliauskas.
First of all, the central bank itself and other institutions will have access to funds from the ECB in an emergency, which should reduce the country risk and cost of financing in the markets, with an estimated cut rates interest of 0.8 percent.
Second entrance in the single currency is expected to boost trade. The eurozone is already the first export destination Lithuanian, from 2015 will be less exchange costs and those incurred to keep hooked currency to the euro (to which it is anchored since 2002). Euroland will then compensate, at least in part, the losses suffered since Russia – which normally counted for 30% of exports of Vilnius – has blocked the EU agricultural products. The Central Bank is expected to increase foreign trade by 5-10% in ten years.
The authorities expect eventually also increased investment.
The greatest fear linked to ‘ adoption of the single currency is already experienced by other countries at the time of the changeover: an uncontrolled increase in prices that food inflation. The government has, however, launched a campaign of grassroots information and promised supervision. The transition will still be short: the two currencies will coexist for only 15 days and from 16 January the euro will be the only legal currency. From the end of March, then, the exchange rate between litas and euro can be done only in the bank.
As you know your money? Go to the quiz on the euro
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