Leaders try to assuage euro - related inflation fears

  • 2005-02-23
  • By Milda Seputyte
VILNIUS - Parliamentary Chairman Arturas Paulauskas has rejected concerns that the ruling coalition was planning to deter introduction of the euro, assuring MPs that the currency changeover would not result in a major price-hike.

After a meeting on Feb. 22 with Reinoldijus Sarkinas, head of the Bank of Lithuania's board, Paulauskas stated that the country was ready to introduce the euro in 2007. "We did not have any debates about postponing the date of euro introduction," he said.

Having assessed the benefits of this common currency, and the need for a comprehensive preparation for the changeover, the Bank of Lithuania considers Jan. 1, 2007 to be the most acceptable date for adoption.

Although the final decision will be made in the EU Council, Sarkinas explained that by the end of 2006 the country would be ready to meet the requirements of the Maastricht Treaty, including low inflation, a budget deficit below 3 percent and public debt less than 60 percent of GDP.

Paulauskas requested that Sarkinas draft the euro-adoption law and submit it for discussion over the next two months. Having taken into account the remarks and proposals, the Bank of Lithuania will submit the draft to the government.

Sarkinas confirmed that while adopting the euro, any changes in market prices, salaries or payment recalculations would have to be carried out to the benefit of consumers. "Despite general round-off rules, all changes in prices, retirement payments or salaries will have to be done for the consumer's benefit," Sarkinas said.

Currently the litas is now linked to the euro under a fixed exchange rate of 3.453 to 1, giving rise to fears that a lot of traders and service suppliers would take advantage of the situation during price conversion and round off the price to euros and not cents.

When asked how tradesmen would be restricted from raising the sums, Sarkinas admitted they still lacked a proper tool for prevention, but he also emphasized that the new currency would not legitimize a price-increase.

"Euro adoption, as such, does not give any basis to increase prices. The prices can only grow due to higher salaries, consumption or some other similar circumstances, but in no way could this happen because of the adoption itself," he said.

The euro will be the country's only currency after introduction. For a short period of time, however, residents will be able to pay for goods and services in litas. In Sarkinas opinion, the deadline should be short - two weeks, for instance, so that the change would not harm businesses. Other eurozone countries already having adopted the euro provided a two-week or three-month layover period for double currency circulation.

Experts estimate that only three new member states, Lithuania, Estonia and Slovenia, will be prepared to adopt the euro by 2007. Latvia is expected to join the zone two years later.