Saturday, January 3, 2015

Lithuania Joins The Club

From the BBC:
"Lithuania joins Baltic neighbours in euro club"

The new year means a new currency for Lithuania - it is joining the euro, following its Baltic neighbours Estonia and Latvia into the currency bloc. Some Lithuanians fear price rises, but opinion polls point to growing optimism towards the euro. With Lithuania's entry the eurozone now has 19 members. Government officials believe the euro will not only boost investment but will also bring deeper integration with the West.  "Given the current geopolitical situation, now it is more relevant than ever," central bank governor Vitas Vasiliauskas says. Lithuania's economic growth is "steady", analysts say, at an estimated 3.1% for 2015. But there is concern about the impact of Russia's economic downturn.  Lithuania's giant eastern neighbour is an important trade partner, but sanctions over Ukraine have soured Russian-EU relations. Once part of the Soviet Union, Lithuania will celebrate its 25th independence anniversary in March.   The small nation of 3.3 million is getting its fourth currency in 25 years - after the Soviet rouble, the 1991-1993 talonas and the litas. "Even before the euro, prices in pharmacies went up - I'm afraid to think about what will happen now," said pensioner Antanina Macijauskiene, selling home-made socks outside a shop in Vilnius, braving the winter cold in an effort to top up her pension.  A teacher, Zita Kriukeliene, remarked: "Our litas currency is emotionally connected with independence."  But the view of successful entrepreneur Dovydas Braukyla is shared by many well-to-do Lithuanians who live in the cities. "Further integration in a unified market will help boost trade and cut currency exchange costs," he said. An average pension in Lithuania is around 830 litas (£188; $291) and will now be 240 euros - a figure which some claim will feel like a big drop psychologically. In late December there were some signs of panic - people were queuing up to deposit cash in bank ATMs or to exchange litas into euros.  Many people appear confused about the switch to the euro. From 1 January they still have two weeks to pay for things in litas, though they will get change in euros. There have even been reports of customers storming some shops to stock up on food.   Small businesses are among the most worried, with some expressing fears of a cash shortage during the changeover.  Nerijus Maciulis, chief economist of Sweden's AB Swedbank in Lithuania, says all three Baltic states recovered smoothly from the 2008 financial crisis and their paths to the euro were similar, standing out as fast-growing economies.  "In Lithuania we joke that we let Latvia and Estonia into the eurozone to see if everything was fine and then we followed." At the central bank, Mr Vasiliauskas says Lithuania's entry completes the Baltic region's economic integration and he expects it to become more attractive for foreign direct investment.

^ Lithuania joined the Eurozone when it looks like Greece will leave it. It's clear that the Baltics are trying their hardest to integrate with the Western world (ie the EU, Eurozone, Schengen and NATO) to solidify their position and make sure the Russians do not invade and annex their countries again. It is surprising that the Lithuanians are having problems with the changeover. Not only is this their 4th currency change in about 50 years, but they saw what happened in neighboring Estonia and Latvia. It's not as chaotic as when the Euro was first introduced in 2002 and no one had a clue how it would go. ^

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