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Lithuania becomes 19th country to join euro 8 years after knock-back

Published time: June 04, 2014 10:07
Edited time: June 04, 2014 12:33
AFP Photo/Philippe Huguen

AFP Photo/Philippe Huguen

Lithuania, the last Baltic nation outside the currency union, has finally been given the green light to join the euro area, after its bid was turned down 8 years ago. The country could adopt the single euro currency on January 1, 2015.

The European Commission and the European Central Bank accepted Lithuania's application on Wednesday.

“Lithuania’s readiness to adopt the euro reflects its long-standing support for prudent fiscal policies and economic reforms. That reform momentum, driven in part by Lithuania's EU accession ten years ago, has led to a striking increase in Lithuanians’ prosperity: the country’s per capita GDP has risen from just 35% of the EU28 average in 1995 to a projected 78% in 2015," Olli Rehn, the European Commission Vice-President responsible for Economic and Monetary Affairs and the Euro, said in the statement.

The ECB looked at eight European Union countries - Bulgaria, the Czech Republic, Lithuania, Hungary, Poland, Romania, Sweden, and Croatia. Only Lithuania met all the criteria to join.

Lithuania first applied for membership on January 1, 2007. It was rejected, as inflation was above the EU’s target by 0.1 percentage point, and expected to go higher. In 2008 it grew to hit 12.5 percent.

The Council will make a final decision on the matter in the second half of July, after EU officials and state heads meet at the European Council from June 26-27. Then the council will also agree on a set conversation rate for Lithuania’s currency the litas to the euro. Eighteen countries already share the currency, a requirement for all member states except for the UK and Denmark.

In order for a country to adopt the euro, it needs to tie its currency to the euro for a two-year period, as well as keep debt below 60 percent of GDP and inflation within 1.5 percentage points of the three lowest rates among the euro zone.

The European Commission said that inflation, the key stumbling block to Lithuania joining the eurozone previously, has been overcome.

In the 12 months leading up to April 2014, Lithuania’s average inflation rate was 0.6 percent, well below the reference value of 1.7 percent, and will likely remain below this level in the coming months, the ECB report said.

Overall, inflation across the euro zone has been half the ECB’s target rate of 2 percent.

The commission credits Lithuania for its triumphant return to economic growth after the recession hit in 2009, including its success in keeping its budget deficit and government debt ratio below ECB rates.

On Thursday, the bank is expected to announce a widely anticipated interest rate cut, venturing into negative deposit rate territory, dipping below zero. The announcement is expected at 7:45 am Eastern Time.

ECB President Mario Draghi, who has hailed the euro zone as an "island of stability" has said he will "do whatever it takes" to save the euro currency, which is weakening before the rate decision.

Comments (60)

 

Thordeus 05.06.2014 12:27

Per Sonne 04.06.2014 16:19



That would have been a huge mistake! Switzerland and Norway have signed most of the agreements and are paying to have access to the EU market. The only thing they are missing practically is the right to vote! Sweden would have lost huge amounts of money due to lost business opportunities if we had stayed out! For example the country that we trade the most with is Germany.

  

Only if you consider success to be selling your independence for temporary coins. Switzerland recently voted to curb immigration from EU countries. Could never have done that if they joined.

 

Nemo1024 05.06.2014 11:20

Mark Pravda 04.06.2014 14:50


What you don't seem to realise is that Lithuania has seen all the Euro issues and still wants to join - as they believe it offers more security - politically- as well as economically, as a small nation surounded by partners who are in the club

  


For Lithuania, it's like grabbing the last ticket to the Commodore class cabin on Titanic and feeling really happy about it. The club... everyone will go down together. Only thing, Euro reminds of a pyramid scheme, favouring early adopters.

 

Emmett 05.06.2014 10:38

Frank Wolstencroft 05.06.2014 02:19

All the Eurozone countries have lost control of their monetary system."Give me control of a nation's money supply and I care not who makes it laws." Meyer Amschel Rothschild. Effectively the Eurozone members are now using a foreign currency created as debt by private banks.

  


Look at US economy which is about to collapse to see how giving control of a nation's money supply to the Rothschilds via the federal reserve banks in 1913 has worked out. This ponzi scheme was the start of the end for US.


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