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22nd Jan 2022

Lithuania embraces membership of 'eurozone family'

  • Lithuania became the 19 member of the eurozone on 1 January (Photo: www.GlynLowe.com)

Lithuania became the 19th eurozone member on 1 January with politicians keen to emphasize the geopolitical benefits of joining the currency amid a few grumbles about price rises and the size of local salaries.

“The worst thing about the euro is that it makes our pensions and salaries look ridiculously low”, Darjuš Bogdiun, a student in mid-twenties tells EUobserver.

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In Lithuania, the average gross monthly salary is €698.70 while the average pension is €240.

"Although the difference in salaries between Lithuania and Western Europe has always been widely known, the possibility of having a direct comparison will encourage employees to put pressure on employers and ask for better wages", chief economist at SEB bank Gitanas Nausėda says.

But a too-rapid hike in salaries would result in business losing competitiveness and a rise in unemplyoment. Fears about rising prices with salaries staying the same, are among the most popular anti-euro arguments.

Cash under the mattress

The new currency has also made some wonder if Lithuanians' preference for using cash rather than bank cards will change.

"I don‘t know whether I should cry or laugh about this money reform," said one person calling into local radio to share her impressions of the currency changeover.

"We spent the last decade complaining about how little money we have, how bad our lives are and how we don‘t have anything to eat - but just have a look at what‘s going on: people are taking money from under their pillows, mattresses, from glass jars dug under the ground, and keep bringing it to banks", she said.

SEB bank said on that on 29 December four times more cash was deposited in its branches, while the number of customers was twice the average.

The first days have also seen big lines in banks, post offices and some credit unions, as customers wanted to exchange the money as soon as possible. As a result, many post office branches run out of notes.

“Joining the eurozone has stirred up the cash flows and made customers put the cash onto their accounts,“ Gitanas Nausėda of SEB bank says.

However, if people keep saving and paying in cash, it is likely that the money will now be withdrawn in euros and cash flows will increase again, he adds.

Data shows that, unlike Latvians or Estonians, Lithuanians are very much attached to cash: more than half are changing their savings in cash into cash in euros.

According to Swedbank Estonia, 60 percent of card owners prefer to pay by card in the country, compared with 40 percent in Latvia and 21 percent in Lithuania.

Also, in Lithuania people take twice as much money out in cash as in Estonia.

Economists say this is down to “under the counter” money, as well as interest rates for time deposits in commercial banks being very low.

Forgery cases continue

It is not just bankers and post offices that have a lot of euro-related work now but also the police.

During the first week alone, thirty pre-trial investigations have been opened, mostly for cases related to counterfeit €20 or €50 notes.

Even though the number of forged euro cases equals to what would previously be taken out of circulation within a year, police says the number of forged notes is still comparatively low.

Vitas Vasiliauskas, governor of the bank of Lithuania, says the peak in support for the euro has been "striking", and notes it is the highest increase among eurozone numbers.

According to Eurobarometer, 63 percent of Lithuanians favour the euro, up from 50 percent a year ago.

“Usually the ‘breaking point’ in public opinion and a rise in positive attitudes happen after the euro adoption when people see the benefits. In Lithuania it happened even before 1 January”, Vasiliauskas tells this website.

He links it to the success of preventive measures such as a period of dual pricing and business signing memorandums to promise that the euro introduction will not be an excuse for raising prices.

However, some customers say they have already observed price differences after the euro conversion.

The euro amid geopolitical turmoil

But in Lithuania, many see geopolitics as more important than price increases or fake money.

With requests for more Nato presence in Lithuania and surprise military exercises being held by Moscow in neighbouring Kaliningrad, a Russian exclave, analysts say closer integration with the West is important, and the euro fits into the context well.

Vasiliauskas says that the euro is the next logical step in Lithiania‘s European orientation.

“The eurozone can be seen as a close family, and, as we believe, a family embraces and protects its members”, he says.

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