Lithuania Smoothly Transitions To EURO

By Vaidotas Beniusis
January 1, 2015
Lithuania welcomed a New Year and a new currency on Thursday, becoming the last Baltic nation to adopt the euro in a bid to boost stability despite fears of inflation and eurozone debt woes.

Prime Minister Algirdas Butkevicius withdrew his first 10-euro bill ($12) from a Vilnius cash machine after midnight, as fireworks signed off a year marked by alarm over Russia’s role in the Ukraine conflict and its economic crisis.

“The euro will serve as a guarantee for our economic and political security,” Butkevicius said at a ceremony alongside officials from Estonia and Latvia.

“The transition to the new currency was smooth and successful,” Lithuanian central bank governor Vitas Vasiliauskas told reporters, as the country became the 19th member of the eurozone.

As shops opened on New Year’s Day, customers said they needed to think twice to assess the value of items in euros, instead of litas.

“Everything seems cheap,” said 32-year-old Kastytis Backis, as he left a supermarket in the capital Vilnius.

The two currencies will circulate together as legal tender for two weeks. Dual pricing will remain until June.

Political uncertainty

“In joining the euro, the Lithuanian people are choosing to be part of an area of stability, security and prosperity,” EU economic affairs commissioner Pierre Moscovici said.

But in the run-up to membership, public support wavered.

Fifty-three percent of the population of three million backed the euro and 39 percent were against, according to a November survey released by the central bank.

Vida Zurziene, in her fifties, said she would keep some litas coins to show her grandchildren.

“I think prices for services, like going to the hairdresser, will go up. But it will be easier to travel,” she told AFP.

Lithuania’s membership comes as political uncertainty in Greece is again stoking fears that the eurozone’s debt crisis could flare up.

Vilnius has already committed hundreds of millions of euros to the eurozone’s rescue fund for struggling members.

“Financial commitments are a huge burden and increase the country’s debt. I think we should have delayed entry,” financial analyst Valdemaras Katkus told AFP.

The litas has actually been pegged to the euro since 2002, making it dependent on the European Central Bank. Vilnius had hoped to adopt the euro in 2007 but failed to meet the inflation criteria.

The global financial crisis put the goal on hold in 2009, when Lithuania suffered a deep recession.

Biting austerity measures far exceeding any applied in Western Europe turned the economy around, resulting in recent growth of around three percent.

Social security cuts and other slashed public spending also encouraged record emigration to richer European nations such as Britain.

Most analysts say eurozone entry will foster export growth and encourage investment.

Lithuania brought in 132 million individual banknotes which are standard across the eurozone from the German Bundesbank but minted its own euro coins.

They include the national coat of arms, a knight on horseback with sword and shield, which has appeared on the national currency since the 14th century.

The three Baltic states broke free from the Soviet Union in 1990-1991 before joining the EU and NATO in 2004. Estonia and Latvia became eurozone members in 2011 and 2014.