Tuesday

31st May 2016

Lithuania set to join eurozone in 2015

  • Vilnius - Lithuania will be the last of the three Baltic states to join the single currency (Photo: FromTheNorth)

Lithuania is set to become the nineteenth member of the eurozone after the European Commission gave its membership bid the green light.

"Lithuania is ready to adopt the euro on 1st Jan 2015," confirmed the bloc's eurozone commissioner Olli Rehn on Wednesday as he published the commission's annual convergence report which assesses eight member states' readiness to join the single currency.

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The commission's recommendation now goes to EU governments who are expected to take the final decision on Lithuania's application in the second half of July.

The Baltic country became the first and only country to be rejected for euro membership in 2006 after missing the target inflation rate and has since seen its neighbours Estonia and Latvia join the currency bloc in 2011 and 2014 respectively.

However, with Lithuania meeting the euro's criteria on its public finances, interest and inflation rates, as well as its exchange rate, its second application is likely to be rubber-stamped, completing what Rehn described as "a Baltic full house in the euro area".

For its part, the European Central Bank also backed Lithuania's bid, although it warned that maintaining the country's low inflation rate “will be challenging in the medium term”.

The positive reports were immediately welcomed by Lithuanian prime minister Algirdas Butkevicius, who has stated that he would resign if his country did not join the single currency at the start of 2015.

“Lithuania worked hard, made every effort and passed the exam successfully,” he told reporters on Wednesday.

In a reference to the EU's ongoing stand-off with Russia over Ukraine, which borders Lithuania, Butkevicius commented that “euro adoption, given the geopolitical situation that formed near the borders of Lithuania, acquires still greater importance. It is one more step towards the deeper economic, financial and political national security.”

The Lithuanian economy grew by 3.4 percent in 2013 and is expected to reach a similar rate this year, while the country's budget deficit is expected to fall to 2.5 percent in 2014 from 3 percent in 2013, the highest figure allowed under the EU's stability and growth pact.

At 40 percent its government debt level is also well below the EU's 60 percent threshold.

But Lithuania is likely to be the last country to join the euro for a number of years.

The UK and Denmark both have opt-outs from the currency in their EU membership terms. Meanwhile, of the seven remaining EU countries - all of whom joined the bloc in 2004 - only Romania has set a target date for joining the euro, with 2019 its planned accession date.

Rehn conceded that the non-euro countries had made "uneven progress," arguing that the currency, which was seemingly on the verge of break-up in 2011, offered "a number of benefits to all countries outside the eurozone".

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