News Analysis: Lithuania firmly believes it will benefit from euro

Lithuanian officials and economists tend to dismiss doubts about the Baltic country's timing of the switch to the euro, saying the economy will undoubtedly benefit from the new currency.

Lithuanian President Dalia Grybauskaite said the euro would make it possible for Lithuania to borrow more cheaply and would help attract new investment in the country.

"In any case, (eurozone) entry now and the movement of the euro exchange rate is probably more beneficial for Lithuania at the moment because our competitiveness increases, as do export possibilities for our producers," the head of state said at her annual news conference on Wednesday.

Nevertheless, Grybauskaite expressed her regrets at Lithuania's missed chance of joining the monetary union in 2007, when the country was denied approval to adopt the euro due to the marginally overstepped inflation ceiling.

"We would have saved some money on borrowing, and our recession would have been less severe in 2009," Grybauskaite noted.

The president's comments highlight the debate over whether Lithuania joined the eurozone at the right time, given the single currency's recent fall and revived fears of Greece's potential departure from the 19-nation currency bloc.

"As far as the situation in Greece is concerned, it's fully understandable since that country, although teetering on the verge of bankruptcy, still failed to take the necessary radical measures and, therefore, was unable to recover ... or to build solid foundations for growth in the next period. This is the reason for those hardships," Grybauskaite was quoted as saying by Baltic News Service (BNS).

She reiterated her firm stance on Lithuania's pragmatic and responsible fiscal policy.

"The euro is just an instrument to continue this policy," Grybauskaite said.

Algirdas Butkevicius, Lithuania's prime minister, said he did not believe there would be a major impact on Lithuania from the Greek crisis.

"I don't think Greece will decide to withdraw from the eurozone after the elections," he told local media earlier this week.

Butkevicius' stance was echoed by Vitas Vasiliauskas, chairman of the board at the Bank of Lithuania.

"Frankly, I think the impact on Lithuania would be negligible because our economic relations with Greece are definitely not well-developed," Vasiliauskas said in an interview with local broadcaster Ziniu Radijas earlier this week.

According to Vasiliauskas, the euro area is already strong enough to withstand potential problems.

Lithuania's official position has been reinforced by economists' views which are that the euro brings Lithuania one more step closer towards being a prosperous Western European society.

The euro area is by far the major export market for Lithuanian goods. Moreover, eurozone countries are an important source of foreign direct investment (FDI) flows, Zygimantas Mauricas, chief economist at Nordea Bank Lithuania, noted in an interview with Xinhua.

"Hence there are considerable contagion risks from the eurozone. However, one needs to understand that these risks exist regardless of whether Lithuania is inside or outside the eurozone," Mauricas said.

According to him, the biggest contagion risk now stems not from the euro area, but from Russia, which still remains among the most important trading and investment partners for Lithuania.

"An ongoing financial and economic crisis in Russia and a resilient German economy makes the euro idea as appealing as ever, economically speaking," Mauricas added.

In terms of Greece, he said the Baltic country was a victim of having unrealistic expectations about the euro that inevitably pushed the country into the subsequent economic hardship.

Lithuania's economy is dependent on the health of the euro area, as 44 percent of Lithuanian origin goods are exported to this geographic region, Vaiva Seckute, senior economist at Swedbank Lithuania, told Xinhua.

"However, the introduction of the euro will not make Lithuania more vulnerable. On the contrary, it will have a positive effect on the Lithuanian economy as interest rates will decrease, export will grow and Lithuania will most likely become more attractive to foreign investors," she added.

The changeover to the euro is running smoothly and according to plan, the European Commission (EC) stated earlier this week.

The previous national currency, the litas, will be phased out during a transitional dual circulation period which ends on Jan. 15. During this period, both currencies have legal tender status in Lithuania. No major problems were observed in banks or in the retail sector, the EC said.

The euro entered circulation in Lithuania on Jan. 1, bringing the number of EU member states using the single European currency to 19 and putting the entire Baltic region into the bloc after neighboring Latvia's and Estonia's accession in 2014 and in 2011 respectively. Endit