Lithuania PM says euro possible in 2012

December 29, 2008

Lithuania hopes to be ready to adopt the euro in 2012 and needs to borrow about 4.5 billion litas ($1.87 billion) next year, the new prime minister said on Monday, the first time he has named a possible euro date.
Until now, Prime Minister Andrius Kubilius of the centre-right Homeland Union party had simply said Lithuania should adopt the euro in the future.

“We hope to be ready to adopt the euro in 2012,” he told an online conference on news portal

Kubilius said the national currency litas will not be unpegged from the euro “for sure”. The litas is pegged to the euro under a currency board system.

Speculation about the currencies of the Baltic states has risen after Latvia slid into recession, prompting some economists to say a devaluation would be less painful than the economic decline which awaits it under its IMF rescue plan.

Lithuania’s central bank has said the country would not be able to adopt the single European currency in 2010, as planned earlier, and the most realistic dates were 2011-2013.

Latvia, which has had to borrow from the International Monetary Fund and the European Union after crashing into recession, is also eyeing 2012. Estonia wants to be ready by 2011.

Kubilius also told the online conference that the government had to borrow to cover 1 billion litas of debt left by the centre-left government and another 1 billion to finance next year’s budget deficit, and has to roll over debts of 2.5 billion next year.

Kubilius earlier told a news conference Lithuania still wanted to raise a eurobond, but would have to wait until the second half of next year for market conditions to improve.

Lithuania had to cancel a 400 million euro eurobond at the start of 2008. Lithuania last week raised 600 million litas ($249.2 million) last week from banks.

The new centre-right government is to target a 2009 public sector deficit of 2.1 percent of gross domestic product (GDP).