Monday, January 24, 2005
Riga, Latvia — The Central Bank of Lithuania announced that it plans to adopt the common European currency, the euro in 2007, and replace its national currency, the litas.
Lithunia intends to introduce the use of the euro as an official currency on January 1, 2007, where it will be used alongside the litas until January 15. From January 15, the euro would become the only official means of payment.
Lithuania joined the European Union in 2004, and like the other new member states, it is obliged to adopt the euro when it is ready. However, in order to adopt the euro, a country must be part of the EU’s Exchange Rate Mechanism II (ERM II) for at least two years. During that time, the currency must not fluctuate more than 2.25% in relation to the euro. Additionally, the budget deficit should be under 3% of gross domestic product.
Lithunia became part of ERM II in June 2004, meaning that the earliest it could join the euro would be in June 2006. However, its target is 2007, which, at the present moment, seems to be achievable, considering the country’s low inflation and budget deficit. The litas has been pegged to the euro, since February 2002, at a rate of 1 euro = 3.45 litas.
So far, only 12 out of the 25 members of the European Union have adoped the euro. However, in the next decade, it is expected that most, if not all, of the ten new member states will adopt the currency. Lithuania is expected to be the first to adopt the currency, in 2007. Estonia and Slovenia, which are the only other new member states that are part of ERM II, are also expected to join the common currency at this time.
Larger countries like Hungary, Czechia and Poland, which are not yet part of ERM II, may have to wait until 2010 at least, due to their large budget deficits.
Lithuania has been one of the most enthusiastic new member states concerning European integration. Besides its early adoption of the euro, it was the first country in the EU to ratify the European Constitution.