Many Lithuanians await euro with apprehension

Lithuania hopes joining the eurozone on Jan 1 will boost its security, but many in the Baltic state fear the currency switch will also bring price hikes.

Fifty-three percent of the population of 3 million people backed ditching the Lithuanian currency, the litas, for the euro, while 39 percent were against, according to a November survey released by the central bank.

"Security concerns, I must admit, were among the reasons for the popular support for euro adoption," said Lithuanian Finance Minister Rimantas Sadzius.

He hailed the move as "the third-most-important step in Lithuania's quest to integrate itself into the Western European community", after joining the EU and NATO in 2004.

But public support for the euro has wavered, dropping below 50 percent at times in the face of widespread concern over the fallout.

"The euro will not increase pensions or wages, it will only increase prices," pensioner Danute Petkeviciene said.

"But they have already decided," she said, referring to the central bank's countdown to when Lithuania becomes eurozone member No 19.

Hopes and fears

Unlike neighboring Poland, which has a free-floating currency, the Lithuanian litas has been pegged to the euro since 2002, making it dependent on the European Central Bank.

"We've actually already had the euro for more than 12 years but it was called the litas," Sadzius said, adding that prices will go up by no more than 0.2 to 0.3 percent after the switch.

Lithuania had hoped to adopt the euro in 2007 but failed to meet the inflation criteria. The country suffered a deep recession in 2009 during the global financial crisis.

A painful austerity drive paved the way for the euro and made Lithuania one of the fastest-growing economies in the EU, with output expanding by around 3 percent in recent years.

But social security cuts and other slashed public spending also encouraged record emigration from Lithuania to richer West European nations such as Britain.

Fellow Baltic states Estonia and Latvia have joined the euro already - Estonia in 2011, and Latvia in 2014. Lithuania lagged because politicians were reluctant to commit before the 2012 general elections.

Now the government says the switch will provide an additional stimulus to the economy, which is already in better shape than many others in the sluggish eurozone.

But experts warn politicians may be tempted to repeat the mistakes of debt-laden Greece, fueled by cheap borrowing and poor fiscal discipline.

"There is a risk that politicians may decide euro adoption was the final goal and to relax budget policies," said Ramunas Vilpisauskas, director of the Institute of International Relations and Political Science in Vilnius.

(China Daily 12/30/2014 page12)