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Accession of Lithuania to the euro area
Commission Européenne - SPEECH/14/564 23/07/2014
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Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro
Accession of Lithuania to the euro area
EU Council of Ministers - General Affairs
Brussels, 23 July 2014
Honourable Ministers, Ladies and Gentlemen,
I am delighted to be here today to welcome Lithuania as the nineteenth member of the euro area.
Lithuania's adoption of the euro, our common currency, is a major event not only for the country, but also for the euro area and the European Union as a whole. Lithuania’s readiness to adopt the euro reflects its long-standing pursuit of prudent fiscal policies and serious economic reforms. This reform momentum, driven partly by Lithuania's EU accession ten years ago, has led to an increase in prosperity as GDP per capita has doubled since 1995.
Thanks to these reform efforts, Lithuania will enter the euro area from a strong position. Lithuania's GDP has been growing by more than 3% per year since 2011 and the economy is forecast to expand further at a similar pace, one of the highest growth rates in the EU. Moreover, the country has robust public finances, including one of the lowest public debt levels in the EU. The Lithuanian economy is flexible and it has shown its ability to operate and adjust under a fixed exchange rate regime for two decades. I count on the Lithuanian authorities to maintain the culture of fiscal prudence adopted over recent years also as a member of the euro area.
Since the Commission on the 4th of June concluded in its Convergence Report that Lithuania has achieved a high degree of sustainable economic convergence, the legislative procedure has involved the ECOFIN, including its euro area Member States, the European Council, the European Parliament and the ECB. The EU institutions have throughout the accession process shown strong support for Lithuania's euro adoption. This process was concluded today by the General Affairs Council. This gives Lithuania sufficient time to prepare for the practical changeover on 1 January 2015.
The Lithuanian authorities can now move full speed ahead with practical euro changeover preparations, building on their significant preparatory work so far. Here, preventing irregular price increases and misperceptions of the evolution of prices will be very important. Many Lithuanians are worried about abusive price setting as a recent Eurobarometer survey has shown. However, looking back at previous euro changeovers, there has been no evidence of any significant price increase attributable to the introduction of the euro.
The Commission services will work closely with the authorities to ensure that citizens are adequately informed about the practical euro changeover aspects. Timely and effective communication will further increase public support for the introduction of the euro.
I am confident that introducing the euro will bring a range of practical benefits to Lithuanian companies and citizens, including the elimination of exchange rate risk and lower transaction costs. As a member of the euro area, Lithuania will participate in decision-making in Eurogroup and ECB on issues that have already affected the country during its twelve-year-old peg to the euro. I am convinced that the stability-oriented policy framework of the euro area will support the catching-up process of the Lithuanian economy, including by attracting more foreign investment.
Becoming a member of the Euro area is a hard-earned achievement for Lithuania. Going forward, it will be essential to continue with sound macroeconomic and structural policies in order to realise the full benefits of the monetary union. We welcome the commitment by the Lithuanian authorities to live up to these policy requirements, and look forward to working with them in the context of the policy co-ordination and surveillance procedures in EMU.
Ladies and Gentlemen,
With the accession of Lithuania this year and Latvia last year all three Baltic States will be in the euro area and share the same currency. The transformation of the Baltic States since their still quite recent independence is truly remarkable. European integration has played a major part in this transformation by opening up possibilities for prosperity and trade.
Now this integration is taken a decisive step forward. Lithuania's euro adoption demonstrates that the Economic and Monetary Union remains an attractive community to be in. The euro area today has more effective economic policy coordination, a robust financial firewall to safeguard stability and, from this year, a banking union. Lithuania's euro adoption shows the benefits of strong and committed policies for the sake of confidence and growth.