Lithuania adopts the euro

By bne IntelliNews January 5, 2015

Lithuania became the last of the Baltic States to adopt the euro on January 1, making another step to strengthen ties with Europe as geopolitical tensions rise in the region.

The euro is coming to a country that is expected to post economic growth of 3.1% in 2015, according to an estimate from the Bank of Lithuania, which revised its outlook from 3.3% in September. Long term, the euro is forecast to add 1.3% to GDP.

For now, however, Lithuania has a number of immediate issues to attend to. With the adoption of the common currency, Lithuania hopes to attract investment, as well as improve borrowing conditions. Underinvestment in particular is seen as a factor to deal with, suggests Swedbank. Another problem is the shrinking labour force. 

The agricultural sector continues to be influenced by Russia’s embargo on food produce, which has also hit the transport sector. Russia is also seen a bigger threat of late after it invaded Ukraine, having prompted Lithuania and its two other Baltic neighbours to increase defence spending, while trying to speed up severing whatever dependencies on Moscow may still exist. 

The reception of the euro amongst the population has been lukewarm at best, with polls showing approximately half of the country opposed to the switch over.

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