BRUSSELS/VILNIUS (dpa) – With Lithuania set to become the eurozone’s 19th member on January 1, hopes are high that the currency will offer stability in a turbulent geopolitical environment.
Lithuania, a former Soviet state, has felt the consequences as relations between Russia – the country’s largest trading partner – and the West have soured, in response to Moscow’s annexation of the Crimean peninsula and its actions in eastern Ukraine.
The country has suffered from Russian bans on EU agricultural produce and is seeking to limit its energy dependence on Moscow by building a gas terminal in the Baltic Sea. Russia has also flexed its military muscle, with the Baltics witnessing a surge in airspace incursions.
Against this backdrop, Lithuania’s political leadership sees closer integration into the European Union as the country’s best security policy.
“To be part of the same euro family should make people feel safer,”European Central Bank (ECB) chief Mario Draghi said at a high-level conference on the euro in Vilnius earlier this year.
Joining the eurozone means “security – not only economic … but also political,” added Lithuanian President Dalia Grybauskaite, in a recent television interview.
Lithuania – which will have an exchange rate of 3.4528 litas to the euro – will be the last of the three Baltic states to join the eurozone, after Estonia took the step in 2011 and Latvia followed suit in 2014.
Having a common currency across the entire Baltic region is “a dream we have all dreamed for many, many years,” said Latvian central bank governor Ilmars Rimsevics. Lithuania had originally been slated to join the euro in 2007, but failed at the time to curb inflation.
Having a shared currency is expected to ease trade between the three countries, by removing exchange costs and making it easier to compare prices.
It could also give the Baltic states greater clout on the board of the ECB if they stick together on monetary policy decisions, as their combined voting power will be greater than that of France or Germany, according to analysts at Germany’s DZ Bank. The Lithuanian government expects the euro to boost the economy by making the country more attractive to foreign investors, removing currency exchange fees, lowering borrowing costs and boosting tourism.
But opponents of the common currency fear that it will drive up prices, as firms seek to profit from the switchover period, and will give the country less leeway to manoeuvre its way out of economic difficulties in future.