At its second attempt, Lithuania has finally been allowed to officially adopt the euro as of 1 January 2015.
And just as well, as Lithuanian Prime Minister Algirdas Butkevičius either threatened or promised to resign, depending on your political leaning, if Lithuania failed to become the 19th country to join the single European currency.
After contentiously missing out in 2007 when Lithuania’s inflation rate was 2.63% and not under the required threshold of 2.6%, Lithuania again met all other criteria quite easily.
This time our inflation was 0.6%, well below the limit of 1.7% which is set at 1.5%; the average of the three best performing EU countries.
The government deficit was 2.1%, comfortably below the 3% ceiling, and public debt was 39.4% of GDP, again easily under the 60% limit.
Long-term interest rates needed to be no more than two percent above the average of the best three Eurozone performing countries and at 3.6%, Lithuania was well and truly below the 6.2% threshold.
The exchange rate was not a problem, requiring recent swings of less than a 15%, but as the litas has been pegged to the Euro since 2004, it is effectively zero.
With the addition of Lithuania the euro will be official currency to a combined population of 336 million people, with a cumulative GDP of US$9.5 trillion. The GDP of the United States of America in 2014 is estimated at US$16.9 trillion.
While many fear that the introduction of the euro will lead to inflation, the government has instead foccused on the business and corporate advantages that joining the Eurozone will bring.
President Dalia Grybauskaite said that the first advantage would be that Lithuania will be part of the decision-making process regarding Europe’s fiscal governance, and will now have a say in decisions directly affecting Lithuania.
The President also cited the reduction of borrowing costs as a significant advantage. The Central Bank has stated that the additional cost of borrowing since the Global Financial Crisis has amounted to an extra two billion litas in interest rate costs for Lithuania.
No-one seems to have mentioned that only a few years ago there was great concern about the very future of the euro, and the high bail-out costs associated with keeping Greece afloat, as the single currency stood on the precipice of collapse.
Lithuania instead focusses on achieving ever greater integration into Euorpe as a way of distancing itself from one of its largest trading partners, and centuries old adversary - Russia.
One of the major concerns of euro adoption is inflation, as costs are inevitably rounded up to the advantage of the retailer. The government quotes a host of safeguards built into the conversion process and assures the public that they will keep a close eye on everyone and come down heavily on any undue profiteering.
While I’m sure they will be on full guard come 1 January next year, they have very much dropped the ball right now because as of 1 July 2014, all menus and price lists were required to include prices in litas as well as euros.
Through a very subjective examination of prices in cafes, stores and even online marchandising, it is apparent that the litas price of goods has begun a steady hike. Prices that were 6.00 litas for example, become 6.21 to equate to 1.8 euro instead of 1.74 euro as an exact conversion would dictate.
While the euro will inevitably cause some short-term pain for the man-on-the-street, its introduction is technically a prerequisite for joining the European Union, and Lithuania was going to have to face the pain sooner or later.
We just hope that the governing powers are able to keep profiteering at a minimum and the irresistable urge by all and sundry of adding a little extra to every price conversion that needs to take place.
Then we can hope to enjoy and appreciate the many other advantages that euro adoption can bring, as we say goodbye to the litas, which in 1993 underscored a hard won independence from Russia.
And today, with the events in Ukraine, that could be more important than ever.
Back to Home Page