Lithuania
is to become the eurozone's 19th member, but only half of Lithuanians are in
favor of the new currency. That will change, Finance Minister Rimantas Sadzius
told DW.
Deutsche Welle, 31 Dec 2014
Why are you
introducing the euro now, given that the whole world is talking about the debt
and economic crises in the euro area?
People have
been talking about the euro crisis for quite a long time and during all that
time, the eurzone proved that it is resilient to external shocks, to internal
tensions and strains. I think the eurozone has achieved a state where it can
cope with the crisis by itself.
Regarding
Lithuania, we've had a currency peg to the euro since 2002. We've undergone all
the challenges that the eurozone has had - internal devaluation, salary cuts,
social benefits cuts during the financial crisis in real terms. But we can't
yet use the benefits of the eurozone.
We started
using some, for example, lower interest rates for borrowing to finance our
small budget deficit. But as of January 1, we will be at the table where
decisions are taken about the eurozone, about monetary policy. For the
investment climate it's also beneficial because we're removing any talk about
any risks, any devaluation of our national currency, because we join the eurozone with the same rate that we fixed the litas to the euro at in 2002.
The
exchange rate has been fixed for some time, as you say. What will change for Lithuanians
apart from the notes and coins in their wallets?
They will
not have to pay exchange fees and we'll have lower interest rates for
borrowing, not just for the state, but also for private firms and individuals.
For investors - and we need investors from abroad - they always calculated the
return on investment by including risk premiums. Now the risk of the
devaluation of the currency is removed, so the return on investment could be
higher.
The magic
number for Lithuania is 3.4528. That's the official exchange rate - 3.45 litas
for one euro. How long do you think people will think in litas?
The
experience of other countries that joined the eurozone showed that people
convert into their old currency for a long time, at least five years …Only half
the population thinks that the changeover to euros is good. But we have the
example of Estonia. It took two years for this number - half of the population
- to increase to 85 percent, who are supporting the euro at the moment.
So, I think
in two years, public support for the euro in Lithuania will be equally high.
Lithuania's euro coins feature the country's coat of arms, a knight on horseback |
How can you
prevent some businesses from using the introduction of the new currency for
price hikes? In Germany, many people thought for a long time that prices had
gone up across the board.
We monitor
prices very carefully. What we see is higher prices in services. But that can
be explained through pay rises of 4 to 5 percent annually. It's clearly not because
of the euro.
Other
prices are stable or even decreasing because of many international economic
factors like cheaper fuel and food. I think there'll be no such effect. We also
have very strict controls and there is also competition.
We shall
see, but monitoring of prices will take place throughout 2015.
The litas
was a very strong symbol, of independence when the communist system broke down
at the beginning of the 1990s. Do you think people will have a problem with
giving up that symbol?
Yes, there
such emotions, we're an emotional people. After the war, the litas served even
longer than pre-war litas - because the litas was restored from pre-war times -
but one side of the euro coin is decorated with our coat of arms, which has
been used for Lithuanian coins since the 14th century. That will now be seen
everywhere in Europe and it shows our identity in Europe.
How do the
crisis in Ukraine and the European sanctions against Russia influence your
currency and economic policies?
We had to
downgrade our economic outlook quite considerably. For next year, we expect
just 0.9-percent growth. We see difficulty for our firms that are exporting
goods to Russia. We had quite a significant flow of re-exports, the transit of
goods, through Lithuania to Russia, which decreased as well.
But on the
other hand, we see that like after the first Russian crisis in 1998, firms are
able to find new markets. They go West and euro adoption is a very favorable
factor for them to look better for European markets.
Rimants
Sadzius is a 54-year-old Social Democrat. He has been Lithuania's finance
minister since 2012 as well as from 2007 to 2008. He studied chemistry and law.
The
adoption of the euro in Lithuania had long looked unlikely because of high
inflation, which Sadzius managed to bring down. Neighbors Estonia and Latvia
introduced the euro in 2010 and 2014 respectively.
In the last
100 years, Lithuania has had several different currencies, including East
Germany's Ostmark, the Soviet ruble, the Russian ruble, the litas and the
talonas. In 1993, the litas was re-introduced. In 2002, it was pegged to the
euro.
Interview conducted by Bernd Riegert