Euro, Lithuania ready to join the single currency in January 2015

Lithuania has what it takes to join the euro area and it now is its time. The European Commission issued it yearly Convergence Report, in which asks the Council to support its proposal of Lithuania joining on 1 January 2015. Lithuania will then hopefully become the nineteenth EU Member State to adopt the single currency. The decision was expected: the country has been working for a long time for replacing Litas (the current national currency), and a possible enlargement of the euro area was already on the table at the beginning of 2014, when another Baltic republic, Latvia, adopted the single currency. With the introduction of the euro in Lithuania all the Baltic Republics will be represented in the euro area.

The adoption of the single currency is subject to the compliance with all the Maastricht criteria: the inflation rate should be not more than 1.5 percentage points above the rate of the three best performing EU countries in terms of price stability during the year before the examination of the Member State’s assessment; the government deficit as % of GDP shouldn’t exceed the 3% threshold; the government debt as % of the GDP shouldn’t exceed the 60% threshold at the end of the latest fiscal year; long-term interest rates shouldn’t be more than two percentage points above the rate of the three best performing EU countries, in terms of price stability. Lithuania has got what it takes: its average inflation rate during the 12 months to April 2014 was 0.6%, “well below the reference value of 1.7% for the same month,” as the Commission underlined. The general government deficit-to-GDP ratio was 2.1% in 2013 an is projected to remain stable according to the EC Spring Forecast, while the government debt stood at 39.4% of GDP. Dealing with the average long-term interest rate, it was 3.6%, “well below the reference value of 6.2%.”

Lithuania’s readiness to join the single currency “reflects the country’s long-standing support for prudent fiscal policies and economic reforms,” said the Commissioner for the EU for Economic and Monetary Affairs, Olli Rehn. “That reform momentum has led to a striking increase in Lithuanians’ prosperity,” he added. “Our continuous and focused efforts were noticed and awarded,” said the Lithuanian Prime Minister, Algirdas Butkevičius. “The adoption of the single currency, given the situation arisen on Lithuanian borders, is even more significant now.”

None of the seven other Member States satisfied all the Maastricht criteria: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden do not currently fulfil all of the parameters to adopt the euro. “Their situation will therefore be reassessed in two years’ time,” reads the Commission statement.