• 2006-05-17

cartoon by Jevgenij Cheksters

May 16 was a day of tough decisions for the European Commission. At a time of enlargement-fatigue in the union, the EU executive had to decide whether to grant Romania and Bulgaria full membership in 2007. The commission also had to make a judgment on allowing Slovenia and Lithuania, the first two qualifying new member states, to adopt the euro. Considering the pessimistic mood in West European member states, the commission needed to be strict 's to stick to the rules 's while at the same time not disillusioning new and soon-to-be-members in Eastern Europe.

Not surprisingly, the commission found itself in an impossible situation. In a manner of speaking, the commission was damned if it did, damned if it didn't. Alas, Romania and Bulgaria were given a conditional "yes" to their membership bid 's they were told to strengthen efforts against corruption and crime 's and Slovenia was shown a green-light for joining the monetary union next January, while Lithuania was not. The Baltic state, which was desperately hoping for eurozone membership, passed all the Mastricht criteria save for inflation. As the European Commission report states: "The average inflation rate in Lithuania during the 12 months to March 2006 was 2.7 percent, just above the reference value of 2.6 percent."

Unfortunately, Lithuania missed passing the inflation test by a hair. However, the commission made it clear that it was no less concerned by current inflationary trends in Lithuanian prices are rising. "Twelve-month average inflation in Lithuania has been slightly above the reference value since April 2005 and, based on the present outlook for inflation, is likely to stay above until the end of the year," the report states.
Reaction from Lithuania was typically emotional, and in some cases it went overboard. Many felt that the commission's decision was political, while one ranking politician went so far as to say that the commission's decision showed "disrespect."

This is silly. In fact, if the issue of adopting the euro has been politicized, then it is in Lithuania. In recent weeks 's no, months 's the country has been knotted up in a series of political crises; indeed, it seems to exist from one crisis to the next. Confidence in the government, which has avoided collapse numerous times, is increasingly low, and the prospects for a healthy working Cabinet are bleak. Against this background, government officials desperately needed to score a victory to restore public trust, and the best 's perhaps easiest 's way to do that would be permission to phase in a new currency come January. What better reminder of European integration, which Lithuanians support, can there be than filling the wallet of every Lithuanian with new bills and coins?

Instead of fretting over the common currency, which will make its way to Lithuanian cash registers sooner than later, Lithuania's leadership should roll up its sleeves and get to work on tax reform, attracting foreign investment (pitifully low), securing EU development funds, shoring up support for a new nuclear power plant and, to state the obvious, fighting inflation. As the commission report warns Lithuania: "In a longer-term perspective, buoyant domestic demand, energy price increases and increases in indirect taxes represent risk factors for inflation. The achievement and maintenance of a low level of inflation in the medium-term will also depend on maintaining the appropriate fiscal policy and on keeping wage growth in line with productivity developments."

If anything, the commission's assessment was a call to go to work. Perhaps, rather than throwing dirt at one another and filling headlines with scandal, Lithuania's ruling parties might try to do just that.