Lithuania ready for peg to euro

VILNIUS - Bank of Lithuania Governor Reinoldijus Sarkinas announced on Nov. 8 that the country's banking system, businesses and population are ready for the repegging of the litas to the euro on Feb. 2.

The litas has been pegged to the U.S. dollar at a rate of four to one since 1994.

"All decisions on changing the base currency have been made, except for a decision on the precise litas-euro fixed exchange rate, which will be made on Feb. 1," Sarkinas told a press conference.

The rate of the litas against the euro will be based on the dollar's value against the euro as announced by the European Central Bank on Feb. 1 at about 3.15 p.m. Lithuanian time. The new rate will be announced at around 4 p.m. the same day.

The repegging comes after years of discussion and preparations involving legal amendments, government and central bank decrees and consultation with bodies like the European Central Bank, the International Monetary Fund and the Bank for International Settlements.

"Linking the litas directly to the euro is a logical step in the context of our political and economic integration with the European Union and of our long-term exchange-rate regime strategy," said Sarkinas.

"The stability of our currency relative to the EU currency should have a positive economic effect and settlement with EU countries - our main trade partners - will become simpler."

Pegging the litas to the euro would make possible Lithuanian membership of the EU's economic and monetary union and adoption of the euro as the national currency - something Sarkinas said could realistically occur in around 2008.

As evidence that the repegging will go smoothly he pointed to a recent poll showing that 92 percent of the population are aware of the imminent change and have begun to prepare for it. Enough leaflets have been printed to inform every household in the country and businesses are already building the new currency policy into their contracts, he said.